p-value
Quantitative Finance glossary · Quantitative Finance
Definition
The probability, computed under the null hypothesis, of observing a test statistic at least as extreme as the one obtained.
p-value in plain English
A p-value helps you judge whether a result is real or could easily be a coincidence. You start by assuming 'nothing interesting is going on' (the null hypothesis, e.g. this new strategy is really no better than random), then ask: if that were true, how likely would I be to see a result at least this striking just by luck? That likelihood is the p-value, so a small one (say under 0.05) means 'pure luck would rarely produce this, so something real is probably happening.' A big caveat: a small p-value suggests the effect is unlikely to be chance, but it does NOT tell you the effect is large or important.
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