hw_2_fall07

hw_2_fall07 - BUAD 310 Fall 07 Dr Arif Ansari Topics...

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BUAD 310 –Fall 07- Dr. Arif Ansari Topics Covered –Hypothesis Testing Homework # 2 - 100 points (Due date 10/08/2007- Monday) Note: I have extended the deadline for homework. For Home Work 2, Turn in Question 1(30 points), Parts (c)-(l), Question 2 (30 points) and Question 3 (30 points), parts (a)-( j ) and Part II (10 points) 1. The beta coefficients of stocks are a measure of their volatility (or risk ) relative to the market as a whole. Stocks with beta coefficients greater than 1 generally bear greater risk (more volatile) than the market, whereas stocks with beta coefficients less than 1 are less risky (less volatile) than the overall market (Sharpe and Alexander, 1990). A random sample of 15 high-technology stocks was selected at the end of 1990, and the mean and standard deviation of the beta coefficients were calculated: x-bar = 1.32, s = 0.35, ( α = 5%) (Note: The data has been modified from the actual paper by Sharpe and Alexander) a. Set up the appropriate null and alternative hypothesis to test that the average high-technology stock is less risky than the market as a whole. (Just to teach you to setup the hypothesis) b. Set up the appropriate null and alternative hypothesis to test that the average high-technology stock has a different risk than the market as a whole. (Just to teach you to setup the hypothesis) c. Set up the appropriate null and alternative hypothesis to test that the average high-technology stock is riskier than the market as a whole. d. Among the three hypothesis you had setup, which is more appropriate hypothesis. (Answer: c) Now answer the questions below based on the part (C), e. Calculate the Test-statistic? Is it a t-test statistics or Z-test statistics? f.

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hw_2_fall07 - BUAD 310 Fall 07 Dr Arif Ansari Topics...

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