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Large sample size bias in empirical finance

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  • Michaelides, Michael

Abstract

The vast majority of empirical studies in finance employ large enough sample sizes and use the conventional thresholds for statistical significance. This routine practice can potentially lead to spurious statistically significant results. The primary aim of this paper is to present a rule of thumb that can be used to determine the appropriate thresholds for statistical significance for a given sample size. The paper argues that the list of statistically significant findings in the broader finance literature is likely to be much shorter after accounting for large sample size bias.

Suggested Citation

  • Michaelides, Michael, 2021. "Large sample size bias in empirical finance," Finance Research Letters, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316494
    DOI: 10.1016/j.frl.2020.101835
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    Cited by:

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    2. Marx, Luana, 2023. "How is the Bolsa Família program associated with the test scores performance of economically disadvantaged pupils in Brazil?," International Journal of Educational Development, Elsevier, vol. 102(C).
    3. Shafiqul Islam & Mohammad Fakhrul Islam & Noor-E- Zannat, 2023. "Behavioral Intention to Use Online for Shopping in Bangladesh: A Technology Acceptance Model Analysis," SAGE Open, , vol. 13(3), pages 21582440231, September.

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    More about this item

    Keywords

    Large sample size; High statistical power; Spurious statistical significance; Appropriate significance thresholds; Methodological crisis; Publication bias;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • G0 - Financial Economics - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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