Question

A financial analyst maintains that the risk, measured by the variance, of investing in emerging markets is more than 280(%)2. Data on 20 stocks from emerging markets revealed the following sample results: = 12.1% and s2 = 361(%)2. Assume that the returns are normally distributed. Which of the following is the correct conclusion of the financial analyst's claim?

A) Do not reject H0. The financial analyst's claim is supported by the sample data at 1% significance level.

B) Reject H0. The financial analyst's claim is not supported by the sample data at 1% significance level.

C) Do not reject H0. The financial analyst's claim is not supported by the sample data at 1% significance level.

D) Reject H0. The financial analyst's claim is supported by the sample data at 1% significance level

Answer 1

To Test :-

H0 :-  

H1 :-  

n = 20

Test Statistic :-

Test Criteria :-
Reject null hypothesis if

= 24.4964 < 36.191 , hence we fail to reject the null hypothesis
Conclusion :- We Fail to Reject H0

Decision based on P value
P value = P ( > 24.4964 )
P value = 0.1778
Reject null hypothesis if P value <
Since P value = 0.1778 > 0.01, hence we fail to reject the null hypothesis
Conclusion :- We Fail to Reject H0

C) Do not reject H0. The financial analyst's claim is not supported by the sample data at 1% significance level.