# Chi-Square Test

*Math & Statistics — Finicade finance glossary*

A chi-square test compares observed counts with expected counts — to test whether a distribution fits, or whether two categorical variables are independent.

A chi-square test compares observed counts with expected counts, either to test whether a distribution fits or whether two categorical variables are independent. In risk management it's the basis of VaR backtesting: if your 99% VaR is right, exceedances should occur about 1% of the time, and a chi-square test says whether the observed count is too high to be luck.

**Also known as:** chi squared test, goodness of fit test, test of independence

**Related terms:** [Hypothesis Test](https://finicade.com/glossary/hypothesis-test), [P-Value](https://finicade.com/glossary/p-value), [Probability Distribution](https://finicade.com/glossary/probability-distribution), [Statistical Significance](https://finicade.com/glossary/statistical-significance), [Degrees of Freedom](https://finicade.com/glossary/degrees-of-freedom)

Source: https://finicade.com/glossary/chi-square-test