- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 6. The Decision Rule

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**CFA Practice Question**

Which of the following statements is (are) true with respect to the relation between a statistical decision and an economic decision?

II. Once the null hypothesis has been accepted using statistical methods, the analyst should not override that conclusion.

III. When both a statistical analysis and an economic analysis support the same conclusion, it would be very imprudent to reject that conclusion.

IV. If each method of analysis leads to a different conclusion, the proper course of action would be to run the statistical analysis again using a different confidence interval.

I. Both methods of analysis should lead to the same conclusion.

II. Once the null hypothesis has been accepted using statistical methods, the analyst should not override that conclusion.

III. When both a statistical analysis and an economic analysis support the same conclusion, it would be very imprudent to reject that conclusion.

IV. If each method of analysis leads to a different conclusion, the proper course of action would be to run the statistical analysis again using a different confidence interval.

A. I and II

B. III and IV

C. III

**Explanation:**I is incorrect because statistical methods do not involve the same degree of judgment as does economic decision-making.

II is not true because sometimes, even if the null hypothesis has been accepted, a conclusion may not make sense on an economic basis, in which case, the analyst would be correct in ignoring the statistical analysis.

IV is not acceptable since changing the confidence intervals after the fact would be an exercise in bias.

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