Concerns About Statistical Significance in Financial Research

Summary

The document asks whether an American Statistical Association statement on p-value misuse will affect finance. The response frames the issue as part of a wider critique of statistical significance, pointing to Deirdre McCloskey’s work on the costs of overreliance on standard errors and significance measures. It suggests that awareness has reached economics and financial economics, but that changes in practice may take time.

The answer describes finance practitioners as having varied backgrounds and raises concerns about statistical competence and reporting practices. It offers a brief opinion about the likely slow effect of the ASA statement rather than evidence on how p-values are used across finance or how practice has changed. It also does not explain the ASA statement’s recommendations or provide a method for improving inference. The material is therefore a caution about statistical culture, not a detailed guide to significance testing.

Key ideas

• The document raises concern about misuse of p-values and statistical significance in finance.
• The response connects this concern to broader criticism of reliance on standard errors.
• It suggests awareness in economics may grow slowly into changes in practice.
• The answer offers opinion rather than evidence about the effects of the ASA statement.
• It does not provide specific guidance for conducting statistical tests.

Tags

# The use of $p$-value in finance after the recent statement of ASA (American Statistical Association)


# The use of $p$-value in finance after the recent statement of ASA (American Statistical Association)












The ASA (American Statistical Association) has just released a statement about the misuse of $p$-value. Will this action have much effect on the use of $p$-value in finance?

## Answer by Kiwiakos (score 2)

https://quant.stackexchange.com/a/24769

Deidre McCloskey has been going on about this for as long as I can remember. See for example the aptly titled : "The cult of statistical significance: How the standard error costs us jobs, justice and lives" http://www.press.umich.edu/script/press/186351

She has raised awareness of the issue in economics and financial economics, but obviously there is a long lag.

In finance practitioners are a motley bunch, with mixed backgrounds. Most are poor statisticians to begin with; then they are asked to compile management information in RAG, where they have to show that they know what they are talking about.

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