Essentials of Time Series for Financial Applications

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A topic which is closely related to confidence intervals is the testing of hypotheses. The theory of hypothesis testing helps to develop procedures to verify the plausibility of conjectures made by a user over the parameters of the model or over some linear combinations of them. Before proceeding, we shall briefly remind the reader that the key idea behind hypothesis testing consists of assuming as true the hypothesis we are traditionally not interested in (which is called the null hypothesis and it is indicated with $H_0$) and evaluate how ...