You teach a section of undergraduate statistics for economists with 100 students. You give the students an
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You teach a section of undergraduate statistics for economists with 100 students. You give the students an assignment: They are to find a creative variable (for example snowfall in Wisconsin), calculate the correlation of their selected variable with stock price returns, and test the hypothesis that the correlation is zero. Assuming that each of the 100 students selects a variable which is truly unrelated to stock price returns, howmany of the 100 students do you expect to obtain a p-value which is significant at the 5% level? Consequently, how should we interpret their results?
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