Reconnecting p-Value and Posterior Probability Under One- and Two-Sided Tests

Abstract

As a convention, p-value is often computed in frequentist hypothesis testing and compared with the nominal significance level of 0.05 to determine whether or not to reject the null hypothesis. The smaller the p-value, the more significant the statistical test. Under noninformative prior distributions, we establish the equivalence relationship between the p-value and Bayesian posterior probability of the null hypothesis for one-sided tests and, more importantly, the equivalence between the p-value and a transformation of posterior probabilities of the hypotheses for two-sided tests. For two-sided hypothesis tests with a point null, we recast the problem as a combination of two one-sided hypotheses along the opposite directions and establish the notion of a “two-sided posterior probability,” which reconnects with the (two-sided) p-value. In contrast to the common belief, such an equivalence relationship renders p-value an explicit interpretation of how strong the data support the null. Extensive simulation studies are conducted to demonstrate the equivalence relationship between the p-value and Bayesian posterior probability. Contrary to broad criticisms on the use of p-value in evidence-based studies, we justify its utility and reclaim its importance from the Bayesian perspective.