# What Is a P-Value?

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Dan Buckley
Dan Buckley is an US-based trader, consultant, and part-time writer with a background in macroeconomics and mathematical finance. He trades and writes about a variety of asset classes, including equities, fixed income, commodities, currencies, and interest rates. As a writer, his goal is to explain trading and finance concepts in levels of detail that could appeal to a range of audiences, from novice traders to those with more experienced backgrounds.
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## What Is P-Value?

P-value is a statistical measure that helps scientists and statisticians determine whether or not their experimental data supports their hypothesis.

When conducting experiments, researchers will form a hypothesis, or an educated guess, about what they think will happen.

They will then test their hypothesis by collecting data. The p-value is a number between 0 and 1 that represents the probability of getting the results that were observed, given that the null hypothesis is true.

### Null hypothesis

The value of the p-variable (in this case, the mean difference between two groups) is equal to zero.

In order for the results of an experiment to be considered statistically significant, the p-value must be less than 0.05. This means that there is only a 5% chance that the results were due to chance.

If the p-value is greater than 0.05, this means that the results are not statistically significant and that the null hypothesis is most likely true. In this case, the data does not support the hypothesis.

## How Is P-Value Calculated?

The p-value is calculated using a statistical test, such as a t-test or ANOVA.

The specific equation used to calculate the p-value depends on the type of data that was collected and the type of statistical test being used.

Once the p-value has been calculated, it can be interpreted to determine whether or not the results of an experiment are statistically significant.

## What Is P-Value Used For?

P-values are used to help scientists determine whether or not their experimental data supports their hypothesis. If the p-value is less than 0.05, this means that the results are statistically significant and that the null hypothesis is most likely false.

In this case, the data supports the hypothesis.

If the p-value is greater than 0.05, this means that the results are not statistically significant and that the null hypothesis is most likely true. In this case, the data does not support the hypothesis.

P-values can be tricky to interpret, so it is important to consult with a statistician when designing experiments and analyzing data.

## Use of the P-Value in Financial Markets

In financial markets, the p-value is used to help study various financial phenomenon.

For example, if a trader wanted to determine whether the price of gold is a statistically significant factor in determining the price of a gold mining stock, they could run a regression analysis with the p-value function.

If the p-value for gold was less than 0.05, this would indicate that the price of gold is a statistically significant factor in determining the price of the mining stock.

If the p-value for gold was greater than 0.05, this would indicate that the price of gold is not a statistically significant factor in determining the price of the mining stock.

The p-value can also be used to help study market efficiency. If all publicly available information is reflected in stock prices, then there should be no relationship between past stock prices and future stock prices.

However, if there is a relationship between past stock prices and future stock prices, this could indicate that the market is inefficient and that there may be opportunities to make profits by trading on this information.

## The P-Value Approach to Hypothesis Testing

In statistics, the p-value is the probability of obtaining results at least as extreme as the observed results of a statistical hypothesis test, assuming that the null hypothesis is correct.

The p-value is used as a measure of the strength of evidence against the null hypothesis.

A small p-value (typically ≤ 0.05) indicates strong evidence against the null hypothesis, so you reject the null hypothesis.

A large p-value (> 0.05) indicates weak evidence against the null hypothesis, so you fail to reject the null hypothesis.

The p-value approach to hypothesis testing is based on choosing a cutoff value for p, called the significance level. If the p-value is less than or equal to the significance level, you reject the null hypothesis.

If the p-value is greater than the significance level, you fail to reject the null hypothesis.

The advantage of the p-value approach is that it doesn’t require you to specify the value of the population parameter in advance.

You can just state your hypotheses and then use data to determine whether or not to reject the null hypothesis.

The disadvantage of the p-value approach is that it doesn’t give you a clear cut-off for deciding whether or not to reject the null hypothesis.

You have to choose a significance level in advance, and sometimes choosing an appropriate significance level can be difficult.

## FAQs – What is a P-Value?

### Why Is a P-Value of Less Than 0.05 Considered Significant?

The p-value is a number between 0 and 1 that represents the probability of getting the results that were observed, given that the null hypothesis is true.

A p-value of less than 0.05 indicates that there is a 5% or less chance that the results were due to chance. In other words, there is a 95% or greater chance that the results are due to something other than chance.

For this reason, a p-value of less than 0.05 is considered to be statistically significant. This means that the data supports the hypothesis.

### What Does It Mean If the P-Value Is Greater Than 0.05?

If the p-value is greater than 0.05, this means that the results are not statistically significant and that the null hypothesis is most likely true. In this case, the data does not support the hypothesis.

This does not necessarily mean that the hypothesis is false, but it does mean that there is not enough evidence to support it. More research may be needed in order to determine if the hypothesis is true or false.

### How Is P-Value Calculated?

The p-value is calculated using a statistical test, such as a t-test or ANOVA.

The specific equation used to calculate the p-value depends on the type of data that was collected and the type of statistical test that’s being used.

Once the p-value has been calculated, it can be interpreted to determine whether or not the results of an experiment are statistically significant.

### How Can a P-Value Be Used to Compare the Results of a Hypothesis Test?

A p-value can be used to compare the results of two different hypothesis tests.

If the p-values from both tests are less than 0.05, this means that the results from both tests are statistically significant and that the null hypotheses for both tests are most likely false.

If the p-value from one test is less than 0.05 and the p-value from the other test is greater than 0.05, this means that the results from the first test are statistically significant and the results from the second test are not. In this case, only the first hypothesis can be supported by the data.

## Conclusion – P-Value

A P-value is a statistical measure that tells us whether there is evidence of a difference between two groups.

If the P-value is less than 0.05, then we can say that there is significant evidence of a difference. If the P-value is greater than 0.05, then we cannot say that there is significant evidence of a difference.

The P-value is not the only measure of evidence, but it is a commonly used one. Other measures of evidence include the confidence interval and the effect size.