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Unformatted text preview: STATISTICS 500 – Fall 2009 – Homework 2 DUE DATE: on campus Friday, 11 Sept 2009, in lecture (11 am) or by e-mailto Chuanlong, [email protected], no later than noon. off campus Monday, 14 Sept 2009, by 4 pm to Nicole Rembert, email: [email protected] or FAX: 515-294-4040 (please include cover page with Stat 500 / Nicole Rembert). 1. Inference based on t-statistics – Financial statisticians are interested in the volatility of a market. When volatility is low, prices change very little over time. When volatility is high, prices change a lot. The direction of the change (up or down) is not important. All that matters is the magnitude of the change. The following data are a small part of a larger study on volatilty of stock prices. There are three major stock exchanges in the US. This small study concerns the volatility on two exchanges (NYSE and NASDAQ) during the week of 12-16 Feb 2007 On each exchange, 40 stocks were randomly selected from all stocks listed on the exchange that week. The volatility was calculated for each stock as the absolute value of the proportional change in stock price. A value of 0% indicates no change in stock price. An exchange with an average change of 5% is less volatile than one with an average change of 10%. Summary statistics for each exchange are: Exchange n average s.d. NYSE 40 2.91% 2.23% NASDAQ 40 4.39% 3.37% (a) Is this study a randomized experiment? Explain briefly. (b) Can these data be used to make inferences about the mean volatility of all stocks on the NYSE during the week of 12-16 Feb 2007? Explain briefly. (c) Estimate the pooled standard deviation, s p . How many degress of freedom does it have?...
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This note was uploaded on 02/11/2012 for the course STAT 500 taught by Professor Staff during the Fall '08 term at Iowa State.
- Fall '08