Why can a statistically significant result still be economically small?

A small p-value means the evidence is strong enough to reject the null at the chosen alpha. It does not automatically mean the effect is large enough to matter economically.

Imagine a low-cost index overlay shows average annual outperformance of 0.03% with a p-value of 0.01 over a very large sample. The result may be statistically significant because the sample is large and the estimate is precise. But after transaction costs, implementation limits, and taxes, a three-basis-point effect may not justify changing the portfolio.

For CFA questions, separate the two judgments:

• Statistical significance: compare p-value to alpha.
• Economic significance: evaluate the size, cost, risk, and practical usefulness of the effect.

Rejecting the null answers the statistical question. It does not finish the investment analysis.