A market risk analyst is examining the loss rate from a bond return series. The bond rating is BBB. The return series has been analysed and statistical hypothesis is conducted (mean comparison test) in STATA. The result is summarized in Table 4.13:

Here, the reported probability value is the p- value, or marginal significance level, against a two- sided alternative. Since this probability value is greater than the size of the test which is 0.05, we cannot reject the null hypothesis. Thus, the mean returns 128 basis points.

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Table 4.13 Hypothesis Testing and Significance Level Hypothesis Testing for LOSS_RATE_BSP Sample: 119 Included observations: 19 Test of hypothesis: Mean = 128 Assuming Std. Dev. = 72.45 Sample Mean = 127.68 Sample Std. Dev. 72.45 Method Value Probability Z-statistic -0.019 0.985 t-statistic -0.019 0.985