Question

Situation:

Many people believe that there is a "Friday effect" in the stock market. They do not necessarily spell out exactly what they mean by this, but there is a sense that the stock prices tend to be lower on Fridays than on other days.

Action:

Because stock prices are readily available on the web, it should be easy to test this hypothesis empirically.

1. Before collecting data and running test, however, you must decide exactly which hypotheses you want to test because there are several possibilities. Formulate at least two sets of null/alternative hypotheses.
2. Decide on criteria to support or refute your hypothesis.
3. Collect a year's worth of data points (52 Fridays and the following Mondays) from the stock market and perform the 2 Sample T - test analysis.
4. Conduct the test at different significance levels and discuss your findings. Can you conclude that there is a statistically significant Friday effect in the stock market?

Friday	Monday
140.52	141.25
140.73	140.64
142.8	142.29
145.13	145.7
142.48	138.73
144.48	146.62
146.84	146.72
144.06	141.03
144.17	143.69
142.42	145.86
145.09	144.44
131.71	127.19
133.24	130.68
129.76	134.43
134.67	136.02
136.09	128.13
131.01	134.02
132.56	140.68
139.7	138.42
137.6	146.7
146.7	148.4
148.07	145.98
147.94	144.42
142.59	148.34
149.4	145.45
146.95	148.45
148.5	143
144.62	140.9
139.58	144.54
129.99	140.5
125.63	130.21
124.61	124.01
120.13	121.56
122.56	119.47
108.63	117.39
115.16	118.18
118.16	122.9
121.07	126.34
124.63	135.86
133.96	131.29
126.96	126.34
127.88	127.91
131.13	131.97
131.05	130.75
134.8	134.01
133.26	132.1
132.12	134.14
127.39	127.58
129.22	131.9
127.38	129.92
131.14	132.75

Answer 1

The hypothesis being tested is:

H0: µ1 = µ2

H1: µ1 ≠ µ2

Friday	Monday
134.8288	135.8784	mean
9.6953	8.7682	std. dev.
51	51	n
	100	df
	-1.04961	difference (Friday - Monday)
	85.43984	pooled variance
	9.24337	pooled std. dev.
	1.83046	standard error of difference
	0	hypothesized difference
	-0.573	t
	.5677	p-value (two-tailed)

The p-value is 0.5677.

Since the p-value (0.5677) is greater than the significance level (0.05), we fail to reject the null hypothesis.

Therefore, we cannot conclude that there is a statistically significant Friday effect in the stock market.