Type i error
Rejecting a null hypothesis that is actually true. Its probability is the significance level, which the analyst chooses, and tightening that level makes Type II errors more likely.
Where you will meet it
Type i error appears in 3 learning outcomes on the CFA syllabus. A few of them:
- Explain what a p-value means and the two kinds of testing error
“A Type I error rejects a true null, and its probability is the significance level the analyst chooses.”
- Say what serial correlation is and what it does to statistical inference
“Positive serial correlation usually makes standard errors too small, so t-statistics are inflated and Type I errors rise.”
- Distinguish Type I from Type II errors when deciding whether to hire or keep a manager
“A Type I error rejects a true null: hiring a manager who lacks skill, or keeping one on.”
See also
Null hypothesis · Type ii error
Practise it
Practise type i error until it is automatic: questions that explain every wrong option.
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