The Ultimate Irrelevance Proposition in Finance?

George Andrew Karolyi

Cornell University - Johnson Graduate School of Management

April 13, 2011

I survey 457 published papers in top Finance journals across two decades to assess whether they misuse tests of significance. Over 80% of published studies are diligent about distinguishing between statistical and economic significance and about quantifying and interpreting the economic magnitudes of the statistical relationships they measure. Yet, only 10% of them acknowledge limits to the power of their tests and fewer still do anything about them. Recent demographic trends in publishing such as larger co-author teams, the increased participation by non-North American scholars, by women and by those outside the top Finance departments are not associated with these outcomes.

Number of Pages in PDF File: 40

Keywords: Empirical methods in Finance, significance tests, power of the test

JEL Classification: G1, C1, C58

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Date posted: April 16, 2011  

Suggested Citation

Karolyi, George Andrew, The Ultimate Irrelevance Proposition in Finance? (April 13, 2011). Available at SSRN: http://ssrn.com/abstract=1809064 or http://dx.doi.org/10.2139/ssrn.1809064

Contact Information

George Andrew Karolyi (Contact Author)
Cornell University - Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States

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