A research analyst follow s the m onthly price data for the Dow Jones Industrial Average for the years 2008– 2010.

The accompanying table shows a portion o f the price data;

the full data set, labeled D ow Jones, can be found on the text website. The analyst wants to test the random -walk hypothesis th a t suggests th a t prices move random ly over tim e w ith no discernible pattern.

Date Adjusted Close Price 1/2/2008 12,650.36 2/1/2008 12,266.39

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12/ 1/2010 11,577.51 Source: h ttp ://fin a n c e .y a h o o .c o m .

a. Use the m ethod-of-runs above and below the median to test the null hypothesis o f randomness against the alternative that there is a trend at the 5% significance level.

b. Can the research analyst conclude that the movem ent of the Dow Jones Industrial Average is consistent w ith the random-walk hypothesis?