Parametric and Non-Parametric Tests of Independence – Module 9 – QM – CFA® Level I 2026
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0:00 Introduction: Parametric & Nonparametric Tests of Independence
Overview of correlation significance
Why these tests matter for CFA Level 1 and real-world finance
0:17 Pearson Correlation Coefficient (Parametric)
Definition of Pearson’s r (range: -1 to +1)
Relationship between two continuous variables
Testing correlation under normality assumptions
1:10 Testing the Correlation Coefficient
Decision rule (reject/fail to reject)
2:10 Chi-Square Test of Independence (Nonparametric)
When variables are categorical
Contingency table (rows & columns)
Null hypothesis (no relationship) vs. alternative (relationship exists)
2:37 Calculating the Chi-Square Statistic
Significance levels (5%, 1%, etc.)
3:35 Practical Tips & CFA Exam Prep
Importance of practice with CFA curriculum examples
Using end-of-chapter questions and FinQuiz resources
Real-world application in financial analysis
4:10 Conclusion & Next Steps
Recap of Pearson vs. Chi-square tests
Final encouragement for mastery in both exam and professional contexts
Invitation to ask questions and continue learning