Evaluation of three methods for calculating statistical significance when incorporating a systematic uncertainty into a test of the background-only hypothesis for a Poisson process

Hypothesis tests for the presence of new sources of Poisson counts amidst background processes are frequently performed in high energy physics (HEP), gamma ray astronomy (GRA), and other branches of science. While there are conceptual issues already when the mean rate of background is precisely known, the issues are even more difficult when the mean background rate has non-negligible uncertainty. After describing a variety of methods to be found in the HEP and GRA literature, we consider in detail three classes of algorithms and evaluate them over a wide range of parameter space, by the criterion of how close the ensemble-average Type I error rate (rejection of the background-only hypothesis when it is true) compares with the nominal significance level given by the algorithm. We recommend wider use of an algorithm firmly grounded in frequentist tests of the ratio of Poisson means, although for very low counts the overcoverage can be severe due to the effect of discreteness. We extend the studies of Cranmer, who found that a popular Bayesian-frequentist hybrid can undercover severely when taken to high Z-values. We also examine the profile likelihood method, which has long been used in GRA and HEP; it provides an excellent approximation in much of the parameter space, as previously studied by Rolke and collaborators.