T-value

Dictionary of Accounting Terms for: T-value
T-value

measure of the statistical significance of an independent variable b in explaining the dependent variable y. It is determined by dividing the estimated regression coefficient b by its standard error SB. That is

Thus, the t-statistic measures how many standard errors the coefficient is away from zero. Generally, any t-value greater than +2 or less than – 2 is acceptable. The higher the t-value, the greater the confidence we have in the coefficient as a predictor. Low t-values are indications of low reliability of the predictive power of that coefficient.

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