# Type I Error

Search Dictionary

## Definition of 'Type I Error'

A Type I error, also known as a false positive, occurs when a statistical hypothesis test incorrectly rejects the null hypothesis. This means that the test concludes that there is a statistically significant difference between two groups when there is actually no difference.

Type I errors are often caused by a lack of power in the statistical test. Power is the probability of correctly rejecting the null hypothesis when it is false. A low power means that the test is more likely to make a Type I error.

There are several ways to reduce the risk of a Type I error. One way is to increase the sample size. This will make the test more powerful and less likely to make a Type I error. Another way to reduce the risk of a Type I error is to use a more conservative statistical test. A conservative test is less likely to reject the null hypothesis, even when there is a real difference between the groups.

It is important to note that Type I errors are not always bad. In some cases, it may be more important to avoid a Type II error, which occurs when the test incorrectly fails to reject the null hypothesis. A Type II error means that the test concludes that there is no difference between two groups when there actually is a difference.

The decision of whether to accept or reject the null hypothesis is based on the level of significance, which is the probability of making a Type I error. The level of significance is typically set at 0.05, which means that there is a 5% chance of making a Type I error.

When interpreting the results of a statistical test, it is important to consider the possibility of a Type I error. If the results are statistically significant, it is important to make sure that the effect is large enough to be meaningful. It is also important to consider the potential consequences of making a Type I error.

Type I errors are often caused by a lack of power in the statistical test. Power is the probability of correctly rejecting the null hypothesis when it is false. A low power means that the test is more likely to make a Type I error.

There are several ways to reduce the risk of a Type I error. One way is to increase the sample size. This will make the test more powerful and less likely to make a Type I error. Another way to reduce the risk of a Type I error is to use a more conservative statistical test. A conservative test is less likely to reject the null hypothesis, even when there is a real difference between the groups.

It is important to note that Type I errors are not always bad. In some cases, it may be more important to avoid a Type II error, which occurs when the test incorrectly fails to reject the null hypothesis. A Type II error means that the test concludes that there is no difference between two groups when there actually is a difference.

The decision of whether to accept or reject the null hypothesis is based on the level of significance, which is the probability of making a Type I error. The level of significance is typically set at 0.05, which means that there is a 5% chance of making a Type I error.

When interpreting the results of a statistical test, it is important to consider the possibility of a Type I error. If the results are statistically significant, it is important to make sure that the effect is large enough to be meaningful. It is also important to consider the potential consequences of making a Type I error.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.

Emini Day Trading /
Daily Notes /
Forecast /
Economic Events /
Search /
Terms and Conditions /
Disclaimer /
Books /
Online Books /
Site Map /
Contact /
Privacy Policy /
Links /
About /
Day Trading Forum /
Investment Calculators /
Pivot Point Calculator /
Market Profile Generator /
Fibonacci Calculator /
Mailing List /
Advertise Here /
Articles /
Financial Terms /
Brokers /
Software /
Holidays /
Stock Split Calendar /
Mortgage Calculator /
Donate

Copyright © 2004-2023, MyPivots. All rights reserved.

Copyright © 2004-2023, MyPivots. All rights reserved.