Forbes magazine points out in every issue the number of stocks recommended for p

Question

Forbes magazine points out in every issue the number of stocks recommended for purchase. A sample of nine recommendations is followed for six months to determine whether these stocks perform better than the overall Dow-Jones index of stocks. The percentage changes above or below the change for the index are -5, 2, -10, 5, 8, 13, 3, -1, and 3.

(a) Find the best point estimate of , the mean percentage change, net of the index change, for all such recommended stocks.

(b) Construct a 99% condence interval for , assuming a normal population and a variance of 40.

Explanation / Answer

best point estimate is mean= (18)/9=2=

z sub .005=2.57

99% confidence interval is 2-2.5740 to 2+2.5740   or

2-16.254 to 2+16.254 or

-14.254 to 18.254

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