Type I and Type II Error Interview Guide
Type I and Type II error interview guide for false positives, false negatives, power, threshold tradeoffs, and examples.
Candidates learning hypothesis-testing tradeoffs.
Type I error is a false positive
A Type I error rejects the null when the null is true. In a signal context, it can mean believing an effect exists when it does not.
Type II error is a false negative
A Type II error fails to reject the null when a real effect exists. Power is one minus the Type II error rate under a specified alternative.
Concrete example
If a strategy test flags a noise pattern as real, that is a false positive. If it misses a real signal, that is a false negative.
Thresholds create tradeoffs
Lowering the significance threshold can reduce false positives but may increase false negatives unless sample size or effect size changes.
Common mistakes
Candidates often say one error type is always worse. The cost of each error depends on the decision context, payoff, and follow-up action.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.