Is 0582 029 and by symmetry the area to the left of

Info icon This preview shows pages 4–6. Sign up to view the full content.

View Full Document Right Arrow Icon
is 0.58/2 = 0.29, and, by symmetry, the area to the left of the value 0 0.556 is also 0.29. The calculated p-value of 0.58 exceeds any reasonable significance level and therefore, with the given data set, there is no evidence to reject the null hypothesis of equal population means for the company returns and the overall market returns. The same conclusion is obtained by comparing the test statistic with a t-distribution critical value. A significance level must be chosen. A sensible choice is a 5% significance level. From the Appendix Table for the t-distribution, using 19 degrees of freedom and a upper tail area of 0.05/2 = 0.025 the critical value is: 2.093 c t It is clear that t 0.556 is smaller than the critical value and so there is no evidence to reject the null hypothesis. Econ 325 – Chapter 10 7 The graph below shows both the p-value calculation and the rejection region for the stock market returns example. PDF of ) 19 ( t 0.556 -0.556 0 tc=2.093 -tc=-2.093 f(t) t p-value / 2 p-value / 2 area = 0.025 Econ 325 – Chapter 10 8
Image of page 4

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 10.2 Tests of the Difference Between Two Means from Independent Samples The construction of a test statistic for the comparison of two means from independent samples depends on the assumptions made about the population variances. Different variance assumptions lead to different test statistics. The lecture notes for Chapter 8.2 presented one set-up that will be presented here. The key assumption is that the two populations have a common variance that is estimated from the sample observations. 2 V Example: The Chapter 8.2 example analyzed daily closing prices for the company Johnson & Johnson for the sample period January to June and the sample period July to December of the year 1999. The data set contained 124 x n observations for the first sample period and observations for the second sample period. 128 y n Econ 325 – Chapter 10 9 Denote the population means of the daily closing prices in the two sample periods by and X P Y P .
Image of page 5
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern