- 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 true with respect to a statistical decision and an economic decision?

II. A statistical decision will always be objective whereas an economic decision may be subjective.

III. If the statistical decision is not to reject the null, it simply implies that the sample results were inconclusive.

IV. A statistical decision may easily be influenced by changing the level of significance of the test.

I. When in conflict, a statistical decision must override an economic decision because the former is an objective test.

II. A statistical decision will always be objective whereas an economic decision may be subjective.

III. If the statistical decision is not to reject the null, it simply implies that the sample results were inconclusive.

IV. A statistical decision may easily be influenced by changing the level of significance of the test.

A. I and III

B. II, III and IV

C. IV only

**Explanation:**I and II are incorrect because a statistical output could very well be manipulated by what's inputted into the test. Therefore, a decision must make both statistical and economic sense.

III is incorrect because if the statistical decision is not to reject the null, it simply implies that the sample results were not strong enough to reject the null.

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**User Contributed Comments**
2

User |
Comment |
---|---|

achu |
Should have known II was false. Remember: stats don't lie, only statisticians! |

achu |
Item III is a word play. "simply not strong enough to reject null", not "simply inconclusive. |