CFA Level I · CFA Level I Exam · Estimation and Hypothesis Testing
An analyst believes a fund's mean monthly return exceeds zero and wants statistical evidence for this belief. Which set of hypotheses is most appropriate?
The appropriate set is H0: μ ≤ 0 versus Ha: μ > 0. The belief the analyst wants evidence for belongs in the alternative hypothesis, and because it states a direction (greater than zero), the test is one-sided rather than two-sided.
- AH0: μ ≤ 0 versus Ha: μ > 0Correct
- BH0: μ > 0 versus Ha: μ ≤ 0
- CH0: μ = 0 versus Ha: μ ≠ 0
Explanation
The claim the analyst wants to support is placed in the alternative hypothesis. Because the belief is that the mean is greater than zero, the alternative is Ha: μ > 0 and the null is H0: μ ≤ 0, a one-sided test. The other sets either reverse the claim or test a different, two-sided question.
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