Z-test and t-test

[Asuka]

It seems that t-test (and t-distribution) is prefereed in CFA text. Is it because most of the returns in financial industry are t-distributed with higher (excess) kurtosis ?

 

[adekunle]

Errr…I don’t know. What I know is, T-test is used when the distribution is normal, variance is unknown, and sample size is small(below 30), can be used for large sample size too. (There’s a table in the curriculum that specifies when it should be used, and when it can’t be used).

 

[busprof]

The t converges to a z in large samples. In practical terms, after n=30 or so, a t and z are practically identical (to about 3 decimals).