Hypothesis Testing (FRM Part 1 2025 – Book 2 – Chapter 6)

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After completing this reading, you should be able to:
- Construct an appropriate null hypothesis and alternative hypothesis and distinguish between the two.
- Construct and apply confidence intervals for one-sided and two-sided hypothesis tests, and interpret the results of hypothesis tests with a specific level of confidence.
- Differentiate between a one-sided and a two-sided test and identify when to use each test.
- Explain the difference between Type I and Type II errors and how these relate to the size and power of a test.
- Understand how a hypothesis test and a confidence interval are related.
- Explain what the p-value of a hypothesis test measures.
- Interpret the results of hypothesis tests with a specific level of confidence.
- Identify the steps to test a hypothesis about the difference between two population means.
- Explain the problem of multiple testing and how it can bias results.

[RafaeldelasCarreras]

James, its a pleassure every time I need help on any topic and I find a video from yourself. Thanks for your job!

[VictoriaVidal-uk]

Hi! Your videos are very good and are helping me a lot to prepare for the exam. Thank you very much!

[jojochau]

Hi Prof. Forjan, thank you for the great videos, they are very helpful.

[seanhohmc]

Please correct me if I am wrong but the example at 12:00 is actually invalid isn't it? As the sample size is <30 and we haven't been told the r.v are normally distributed. So in reality no CI can be found using either Z or t

[eliotviveros]

Hi prof, your videos are great! I'm studying for FRM Part1.
I have a question, in min 3:00, in the sample variance, you presented the formula for doing this, but the formula do not have the square in (Xi-XBar), I think the square is necessary, no?

[GavinBull]

Really helpful videos but noticed a typo at. 2:21 first bullet, you’ve given the sign for variance but referred to standard dev.

[yesteenr]

Is Excel worksheet available in FRM exam?

[nitingoyal]

Thank you so much... Great video..
Can you please explain the P-Value?

[MusicParadise]

Hi AnalystPrep, Is Chi-square test still in the syllabus for 2021? Please answer me, thanks