Hypothesis testing allows us to test an idea. This is when we formulate two hypotheses and want to assess whether one of them can be rejected at a given level of certainty. While testing for the mean, the variance of the population can be either known or unknown. The assumption that the variance is known is less practical, as it doesn’t occur very often in real life.
Hypothesis testing is one of the most useful tools for statisticians and data scientists. Whenever we have to test an idea, it comes down to executing a hypothesis test.
Other related topics you might be interested to explore are Confidence Intervals, and Testing for the Mean with unknown variance.
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Hypothesis testing for the mean is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.
