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How to use the t-statistic

January 29, 2016
  1. Determine the level of significance which is 100% minus the confidence level.
  2. Determine if it is a one-tail or a two-tail test. Confidence Intervals are always two-tailed.
  3. Determine degrees of freedom which is usually one less than the sample size or (n-k-1).
  4. Look up the critical t-value
  5. Standard Confidence Interval is: sample mean +/- t-critical * standard deviation

Confidence Interval Around the Mean requires the use of standard error instead of standard deviation, standard error is calculated as follows:

standard error = standard deviation / √n


From → Quant

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