Question

A study is conducted in order to determine if there is a relationship between the price of stocks and related company news reported in financial press.

a. What would be the response variable?

b. What would be the explanatory variable?

c. Is it reasonable for the two variables to have a cause-and-effect relationship? Explain.

d. Is either variable quantitative? Explain.

Answer 1

Ans:

a)Response variable: price of stocks,as price will be affected by related company news in finacial press.

b)explanatory variable:related company news,as it affects the stock price.

c)No,as correlation between two variables does not mean that they have significant cause-and-effect relationship.In this case, how can we tell whether the media’s coverage altered the market’s response, or whether some unobserved feature of the event simultaneously drove both coverage and market reaction

d)Yes,stock price is quantitaive variable,as it price can be meaured quantitavely.