What is the significance level (alpha) in hypothesis testing?

The significance level, often denoted as alpha (α), plays a crucial role in hypothesis testing, as it represents the threshold for determining whether to reject the null hypothesis. Specifically, alpha is defined as the probability of making a Type I error, which occurs when the null hypothesis is true but is incorrectly rejected. By convention, a common alpha level is 0.05, meaning there is a 5% chance of concluding that there is an effect or difference when, in fact, there is none.

This is fundamental to the decision-making process in hypothesis testing. When conducting a test, researchers compare the p-value (the probability of observing the test results under the null hypothesis) to the significance level. If the p-value is less than or equal to alpha, the null hypothesis is rejected. Recognizing that alpha quantifies the likelihood of mistakenly rejecting a true null hypothesis is essential for understanding the balance between the risks of Type I and Type II errors in statistical decisions.