Honest Hypothesis Testing: A Parable

Typical empirical methods training for finance Ph.D students emphasizes theory and application of statistical tools, augmented by study of empirical applications published in the academic journals. But newly minted faculty/authors will also have to cope with opinions of their administrative and academic journal evaluators, something not as heavily stressed in the heavily methods-oriented curriculum. We put a humorous slant on this by providing a parable in which a seemingly simple, standard hypothesis test is subject to the crucible of peer opinion both within and outside the professor's domicile. The parable is used to teach that the interpretation of seemingly simple test statistics is not so simple, and is intended to help instructors augment traditional statistics pedagogy.