Test Statistic (Z):
P-Value: $2 \times P(Z < -2.133) \approx \mathbf{0.033}$
Comparing Version A ($n=25, \bar{x}=4.8$) and Version B ($n=25, \bar{x}=5.4$).
| Error Type | Statistical Term | Business Reality | Primary Consequence |
|---|---|---|---|
| Type I | $\alpha$ (False Positive) | Rejecting a true $H_0$ (Thinking it works when it doesn't). | Wasted resources & implementation costs. |
| Type II | $\beta$ (False Negative) | Failing to reject a false $H_0$ (Missing a working solution). | Ongoing fraud losses & missed protection. |
In Fintech, Type II errors are often more catastrophic. A Type I error is a "sunk cost" (investment), but a Type II error represents "unbounded loss" as fraud continues to drain capital.
As sample size increases, the overlap between distributions decreases, reducing $\beta$ and increasing Statistical Power ($1-\beta$) without sacrificing $\alpha$.
Decreasing $\alpha$ (being stricter) naturally increases $\beta$ (missing more effects). To keep both risks low, the only "free lunch" in statistics is increasing the Sample Size, which sharpens the test's ability to detect the truth.
Since $P(0.021) \leq \alpha(0.05)$, we Reject the Null Hypothesis ($H_0$). The results are statistically significant at the 95% confidence level.
"Our analysis confirms the new churn model is effective. There is only a 2.1% probability that these results are due to random luck. We can confidently proceed with using this model to identify at-risk customers."
If the sample isn't representative, we face Selection Bias. The model may look great on paper but fail in the real market, leading to wasted investment.
A $p$-value detects existence, not impact. A "significant" model might only improve retention by 0.1%—statistically real, but practically negligible.
Spiegelhalter, D. (2019). The Art of Statistics: How to Learn from Data. Basic Books.
Core Focus: A modern guide to understanding risk, uncertainty, and the nuances of statistical interpretation in daily life and business.
Wasserman, L. (2004). All of Statistics: A Concise Course in Statistical Inference. Springer.
Core Focus: Bridges the gap between classical frequentist inference and modern Machine Learning applications.
Casella, G., & Berger, R. L. (2002). Statistical Inference. Duxbury Resource Center.
Core Focus: The rigorous mathematical standard for graduate-level statistical theory and formal hypothesis testing frameworks.
"Statistical thinking will one day be as necessary for efficient citizenship as the ability to read and write." — H.G. Wells