Assignment: The Value of Business Statistics for Students

STATISTICS FOR
BUSINESS
STUDENT ID:
[Pick the date]

TASK 2
(ii) The requisite hypotheses are defined as follows.
Null Hypothesis (H0): μ = 5% i.e. average return on Google stock is not different from 5%.
Alternative Hypothesis (H1): μ ≠ 5% i.e. average return on Google stock is different from 5%.
Level of significance = 5%
The requisite test statistics to be used here would be t statistics. This is because the
population standard deviation (i.e. standard deviation of GOOGLE stock returns over the
entire listing period) is not given. Thus, one-sample t test would be used to compare the
population mean.
T-stat = (X-μ)/s/n0.5
Here X (sample average) = 1.238%
S (sample standard deviation) = 5.786%
n (sample size) = 60
T statistic = (1.238-5)/(5.786/600.5) = -5.04
Degree of freedom = 60-1 = 59
For df=59 and tstat =-5.04, p value = 0
Since p value < level of significance, hence the evidence presented is sufficient to warrant
null hypothesis rejection and alternative hypothesis acceptance. Hence, it may be concluded
that average return on Google stock is different from 5%.
(iii) The requisite hypotheses are defined as follows.
Null Hypothesis (H0): σgoogle2 = σamazon2 i.e. the standard deviation of returns of Google and
Amazon stock does not differ significantly.
Alternative Hypothesis (H0): σgoogle2 ≠ σamazon2 i.e. the standard deviation of returns of Google
and Amazon stock does differ significantly.