What is Hypothesis testing?

A statistical hypothesis test is a method of statistical inference used to decide whether the data at hand sufficiently support a particular hypothesis. Hypothesis testing allows us to make probabilistic statements about population parameters.

First, a tentative assumption is made about the parameter or distribution. This assumption is called the null hypothesis and is denoted by H0. An alternative hypothesis (denoted Ha), which is the opposite of what is stated in the null hypothesis, is then defined. The hypothesis-testing procedure involves using sample data to determine whether or not H0 can be rejected. If H0 is rejected, the statistical conclusion is that the alternative hypothesis Ha is true.

 

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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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