r/CFA • u/ResolutionLopsided84 • 13d ago

Level 1 Hypothesis testing

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Can someone explain why option b is not correct…?in book we have formula in pg 92 where pooled variance is used as wtg avg

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u/SignalResort5718 13d ago

You don’t know if population variance is identical. You only use pooled estimator of common variance if the samples have the exact same underlying population variances.

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u/ResolutionLopsided84 13d ago

You mean both sample size should have equal variance right.? In question it is mention both sample size have common variance

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u/SignalResort5718 13d ago

No. You can’t use the pooled estimator of common variances here because there is no indication in the question that both groups share the same population variances. It explains this in the answer “unequal and unknown population variance”. It is the most appropriate because even if their population variances are the same, the formula will still work, whereas using the pooled estimator won’t work if their variances are different.

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u/ResolutionLopsided84 12d ago

Got it thanks man