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 hightechnology stocks was
selected at the end of 1990, and the mean and standard deviation of the beta
coefficients were calculated:
xbar
= 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 hightechnology 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 hightechnology 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 hightechnology 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 Teststatistic? Is it a ttest statistics or Ztest statistics?
f.
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 Fall '07
 Lv
 Business, Statistics, Statistical hypothesis testing, a. b. c., b. c. d.

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