Critical value and the decision rule

A T-test is any statistical hypothesis test in which the test statistic follows a student's T-distribution under the null hypothesis. It can be used to determine whether two sets of data are significantly different from each other. For a one-sample T-test and for the null hypothesis that the mean is equal to a specified value μ₀, we use the following statistic, where t is the T-value, is the sample mean, μ₀ is the our assumed return mean, σ is the sample standard deviation of the sample, n is the sample size, and S.E. is the standard error:

The degrees of freedom used in this test are n - 1. The critical T-value is used to accept or reject the null hypothesis. The decision rule is given here:

In the previous section, we mentioned two critical values: 2 for a T-value and 0.05 for a P-value....