- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 8. Hypothesis Testing
- Subject 3. Test Statistic and Significance Level
CFA Practice Question
The larger the critical value on the z-statistic, ______.
A. the easier it is to reject the null hypothesis
B. the harder it is to reject the null hypothesis
C. the easier it is to accept the null hypothesis
Explanation: To reject a null hypothesis, the z-statistic must be larger in magnitude than the critical value for a given level of significance.
User Contributed Comments 6
| User | Comment |
|---|---|
| yanpz | How about if the critical value is negative? If the absolute number is larger, it's harder to reject, but as "value", are we talking about number without +/-? |
| rainbowsoda | Is there negative Z? |
| keit | what is the difference between answers B and C ? |
| csquared | Perhaps because the null hypothesis is never really "accepted"...when the null is not rejected, it's called "fail to reject" as opposed to "accepted". That's my guess. |
| danlan | Agree with csquared. For rainbowsoda, the value means the absolute value. |
| Mariecfa | It is the absolute value of a test statistic that needs to be greater than its critical value to be able to reject the Null hypotheses. If the null hypothesis is rejected. There is significance evidence to warrant the claim to rejection of the null. If the null hypothesis is failed to be rejected, there is not sufficient evidence to support the claim of the alternative hypotheses. |