Question

Many investors and financial analysts believe the Dow Jones Industrial Average (DJIA) gives a good barometer of the overall stock market. On January 31, 2006, 9 of the 30 stocks making up the DJIA increased in price (The Wall Street Journal, February 1, 2006). On the basis of this fact, a financial analyst claims we can assume that 30% of the stocks traded on the New York Stock Exchange (NYSE) went up the same day.

A sample of 72 stocks traded on the NYSE that day showed that 24 went up.

You are conducting a study to see if the proportion of stocks that went up is significantly more than 0.3. You use a significance level of α=0.005α=0.005.

What is the test statistic for this sample? (Report answer accurate to three decimal places.)
test statistic =

What is the p-value for this sample? (Report answer accurate to four decimal places.)
p-value =

Answer 1

The null and alternate hypothesis are:

H0:

Ha:

The test statistic is given by:

Since this is a right-tailed test, so the p-value is given by:

Since p-value is greater than 0.005, so we do not have sufficient evidence to reject the null hypothesis H0.

Thus we cannot conclude that the proportion of stocks that went up is significantly more than 0.3.