Stock returns. Companies that are ISO 9000 certified have met standards that ensure they have a quality management system committed to continuous improvement.

Going through the certification process generally involves a substantial investment that includes the hiring of external auditors. A group of such auditors, wishing to “prove” that ISO 9000 certification pays off, randomly selected a sample of small and large companies with and without ISO 9000 certification. Size was based on the number of employees.

They computed the % change in closing stock price from August 2006 to August 2007. The two-way ANOVA results are presented here (data obtained from Yahoo!

Finance).

a) Is this an experiment or an observational study?

b) State the hypotheses.

c) Given the small P-value associated with the ISO 9000 factor and that the mean annual return for the companies with ISO 9000 is 30.7% compared to 14.4% for those without, the auditors state that achieving ISO 9000 certification results in higher stock prices. Do you agree with their statement? Explain.

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Sum of Mean Source DF Squares Square F-ratio P-value ISO 9000 1 2654.4 2654.41 5.78 0.022 Size 1 0.2 0.18 0.004 0.984 Interaction 1 1505.5 1505.49. 3.28 0.079 Error 36 16545.9 459.61 Total 39 20705.9