The American Association of Individual Investors conducts a weekly survey of its

Question

The American Association of Individual Investors conducts a weekly survey of its members to measure the percent who are bullish, bearish, and neutral on the stock market for the next six months. For the week ending November 7, 2012 the survey results showed 38.5% bullish, 21.6% neutral, and 39.9% bearish website, November 12, 2012). Assume these results are based on a sample of 300 AAII members. a. Over the long-term, the proportion of bullish AAII members is.39. Conduct hypothesis test at the 5% level of significance to see if the current sample results show that bullish sentiment differs from its long-term average of.39. What are your findings? Over the long-term, the proportion of bearish AAII members is.30. Conduct a hypothesis test at the 1% level of significance to see if the current sample results show that bearish sentiment is above its long-term average of.30. What are your findings? Would you feel comfortable extending these results to all investors?

Explanation / Answer

Answer to the question)

part a)

Ho: p= 0.39

Ha: p not equal to 0.39

.

SE = sqrt(0.39*0.61/300) = 0.02816

.

z = (0.385-0.39) / 0.02816 = -0.18

P value = 0.4286

.

Fail to reject the null hypothesis

.

Part b)

SE = sqrt(0.30*0.70/300) = 0.0265

z = (0.399-0.30)/0.0265 = 3.74

P value = 1- 0.9999 = 0.0001

.

reject the null hypothesis

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