How does the Benjamini-Hochberg procedure work?

Sort p-values p_(1) <= p_(2) <= ... <= p_(m). Find largest k where p_(k) <= (k/m)*alpha. Reject all H_i for i <= k. This controls the FDR at level alpha while being more powerful than Bonferroni.

What FDR threshold is appropriate for factor research?

A 5% FDR means 5% of declared significant factors are false positives. For serious research, 1% is preferred. With 300 published factors and true 10% discovery rate, BH at 5% would declare ~30 factors significant.

Data Mining False Discovery Rate Calculator

Control the false discovery rate in financial backtests using the Benjamini-Hochberg procedure. Sort p-values, apply BH correction, and identify which strategies are genuinely significant.

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Frequently Asked Questions

How does the Benjamini-Hochberg procedure work?

What FDR threshold is appropriate for factor research?