### Significance Level

The significance level in statistics is the level of probability at which it is agreed that the null hypothesis will be rejected. In academic research, usually, a 0.05 level of significance (level of significance) is used. The level of significance is also called a level of risk.

### Significance Level in Statistics

The level of significance of an event (such as a statistical test) is the probability that the event will occur by chance. If the level is quite low then the probability of occurring that event by chance will be quite small. One can say that the event is significant as its occurrence is very small.

The significance level is the probability of rejecting the null hypothesis when it is true. In other words, the significance level is the probability of making a Type-I error, which is the error of incorrectly rejecting a true null hypothesis.

*Type I **Error*

*Type I*

*Error*

It has become part of the statistical hypothesis-testing culture.

- It is a longstanding convention.
- It reflects a concern over making type I errors (i.e., wanting to avoid the situation where you reject the null when it is true, that is, wanting to avoid “false positive” errors).
- If you set the level of significance at 0.05, then you will only reject a true null hypothesis 5% of the time (i.e., you will only make a type-I error 5% of the time) in the long run.

## The trade-off between Type-I and type-II Error

The choice of significance level is a trade-off between Type-I and Type-II errors. A smaller/ lower level of significance reduces the likelihood (probability) of Type-I errors (false positives) but increases the likelihood of Type-II errors (false negatives). In other words, the chance of type-I error increases for a higher significance level but decreases the chance of type-II error.

In summary, the significance level is a crucial stage in the hypothesis testing procedure that helps the researchers make decisions about whether to accept or reject a null hypothesis based on the observed data.

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