In 39 of the 61 years from 1950 through 2010 (in 2011 there was virtually no change), the S&P 500 finished higher after the first five days of trading. In 34 of those 39 years, the S&P 500 finished higher for the year. Is a good first week a good omen for the upcoming year? The following table gives the first-week and annual performance over this 61-year period:

a. If a year is selected at random, what is the probability that the S&P 500 finished higher for the year?
b. Given that the S&P 500 finished higher after the first five days of trading, what is the probability that it finished higher for the year?
c. Are the two events "first-week performance" and "annual performance" independent? Explain.
d. Look up the performance after the first five days of 2012 and the 2012 annual performance of the S&P 500 at llnance.yahoo.com. Comment on the results.

Transcribed Image Text:

S&P 500'S ANNUAL PERFORMANCE Lower Higher 34 FIRST WEEK Higher Lower