Hypothesis Testing for Relationship between Volatility and Quarterly Performance in Smaller-Cap Stocks

Statistical Analysis of Volatility and Quarterly Performance in Smaller-Cap Stocks

Prev Question Next Question

Question

Richard Eisenberg, a quantitative analyst with Middle Road Brokerage, has been instructed to perform a statistical analysis to determine the relationship between the volatility of smaller-cap stocks and the quarterly performance of a series of smaller-cap mutual funds. Mr. Eisenberg begins his assignment by formulating and stating a hypothesis. Next, he identifies the appropriate test statistic and the probability distribution for the series. Mr. Eisenberg then progresses to specifying the significance level for the hypothesis test. Now that the first three steps of a hypothesis test have been completed, Mr. Eisenberg should proceed to which of the following? Choose the best answer.

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E. F.

Explanation

Hypothesis testing involves a series of seven explicit steps:

Step 1: Formulating and stating the hypothesis

Step 2: Identifying the appropriate test statistic and its probability distribution

Step 3: Specifying the significance level

Step 4: Stating the decision rule

Step 5: Collecting the data and performing the necessary calculations

Step 6: Making the statistical decision

Step 7: Making the economic/investment decision.

Prev Question Next Question