Why Use a t-Statistic?
Company: Two Sigma
Role: Data Scientist
Category: Statistics & Math
Difficulty: hard
Interview Round: Technical Screen
In the context of an A/B test or a linear regression, explain why the t-statistic is a useful measure for evaluating whether an estimated effect differs from zero.
Your answer should address:
1. The definition of the t-statistic.
2. Why it is more informative than looking at the raw coefficient alone.
3. How effect size, variance, and sample size affect it.
4. Its relationship to confidence intervals and p-values.
5. The assumptions required for interpreting it correctly, and situations where the t-statistic can be misleading.
Quick Answer: This question evaluates understanding of the t-statistic as a standardized measure for testing whether an estimated effect differs from zero, covering how effect size, variance, and sample size influence the statistic, its relationship to confidence intervals and p-values, and the assumptions and limitations that can make it misleading.