December 2020 CFA Level 1: Study Session 3. Quantitative Methods: Application - Reading 11. Hypothesis Testing

CFA Exams
Dec. 2020 Level 1
Study Session 3. Quantitative Methods: Application
Reading 11. Hypothesis Testing

Reading 11. Hypothesis Testing

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Learning Outcome Statements

	Reading 11. Hypothesis Testing
	1. Introduction a. define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses;
	2. Null Hypothesis and Alternative Hypothesis b. distinguish between one-tailed and two-tailed tests of hypotheses;
	3. Test Statistic and Significance Level c. explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis testing;
	4. Type I and Type II Errors in Hypothesis Testing c. explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis testing;
	5. The Power of a Test d. explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests;
	6. The Decision Rule e. distinguish between a statistical result and an economically meaningful result; f. explain and interpret the p-value as it relates to hypothesis testing;
	7. The Relationship between Confidence Intervals and Tests of Significance d. explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests;
	8. Hypothesis Tests Concerning the Mean: T-Test vs. Z-Test g. identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of both large and small samples when the population is normally or approximately distributed and the variance is 1) known or 2) unknown;
	9. Hypothesis Tests Concerning Differences between Means h. identify the appropriate test statistic and interpret the results for a hypothesis test concerning the equality of the population means of two at least approximately normally distributed populations, based on independent random samples with 1) equal or 2) unequal assumed variances;
	10. Hypothesis Tests Concerning Mean Differences (Paired Comparisons Test) i. identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations;
	11. Hypothesis Tests Concerning a Single Variance j. identify the appropriate test statistic and interpret the results for a hypothesis test concerning 1) the variance of a normally distributed population, and 2) the equality of the variances of two normally distributed populations based on two independent random samples;
	12. Hypothesis Tests Concerning Differences between Variances j. identify the appropriate test statistic and interpret the results for a hypothesis test concerning 1) the variance of a normally distributed population, and 2) the equality of the variances of two normally distributed populations based on two independent random samples;
	13. Parametric and Non-Parametric Tests k. distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate.