Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2024-12-20
Number: 24-077/III
Author-Name: Peder Isager
Author-Workplace-Name: Oslo New University College
Author-Name: Jack Fitzgerald
Author-Workplace-Name: Vrije Universiteit Amsterdam and Tinbergen Institute
Title: Three-Sided Testing to Establish Practical Significance: A Tutorial
Abstract: Researchers may want to know whether an observed statistical relationship is either meaningfully negative, meaningfully positive, or small enough to be considered practically equivalent to zero. Such a question can not be addressed with standard null hypothesis significance testing, nor with standard equivalence testing. Three-sided testing (TST) is a procedure to address such questions, by simultaneously testing whether an estimated relationship is significantly below, within, or above predetermined smallest effect sizes of interest. TST is a natural extension of the standard two one-sided tests (TOST) procedure for equivalence testing. TST offers a more comprehensive decision framework than TOST with no penalty to error rates or statistical power. In this paper, we give a non-technical introduction to TST, provide commands for conducting TST in R, Jamovi, and Stata, and provide a Shiny app for easy implementation. Whenever a meaningful smallest effect size of interest can be specified, TST should be combined with null hypothesis significance testing as a standard frequentist testing procedure.
Classification-JEL: C12, C18, C87
Keywords: Three-sided testing, equivalence testing, interval testing, hypothesis testing, R, Stata, NHST, effect size
File-URL: https://papers.tinbergen.nl/24077.pdf
File-Format: application/pdf
File-Size: 916.294 bytes
Handle: RePEc:tin:wpaper:20240077