An analyst is trying to determine whether the prices of certain stocks on the NA
ID: 3160397 • Letter: A
Question
An analyst is trying to determine whether the prices of certain stocks on the NASDAQ are independent of the industry to which they belong. She examines four industries and classifies the stock prices in these industries into one of three categories (high-priced, average-priced, low-priced).
Industry
Stock Price I II III IV
High 20 8 20 22
Average 34 29 11 16
Low 9 15 8 13
a. Choose the competing hypotheses to determine whether stock price depends on the industry. H0: Stock price is dependent on the industry.; HA: Stock price is independent of the industry. H0: Stock price is independent of the industry.; HA: Stock price is dependent of the industry.
b-1. Calculate the value of the test statistic. (Round intermediate calculations to 4 decimal places and your final answer to 2 decimal places.) Test statistic
b-2. Use Excel to calculate the p-value. (Round your answer to 4 decimal places.) p-value c. At a 5.0% significance level, what can the analyst conclude? Reject H0; the stock price is not dependent on the industry Reject H0; the stock price is dependent on the industry Do not reject H0; the stock price is not dependent on the industry Do not reject H0; the stock price is dependent on the industry
Explanation / Answer
a. Choose the competing hypotheses to determine whether stock price depends on the industry.
answer : H0: Stock price is independent of the industry.; HA: Stock price is dependent of the industry.
b) we will use chi-square test for independence and calculate this with the help of Excel
Chi-Sq = 20.303, DF = 6,
c) P-Value = 0.002 < 0.05 = significance level
. At a 5.0% significance level, Reject H0; the stock price is dependent on the industry
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