Stock Market: Testing for Randomness Above and Below the Median Trends in business and economics applications are
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Stock Market: Testing for Randomness Above and Below the Median Trends in business and economics applications are often analyzed with the runs test. Data Set 25 in Appendix B lists the annual high points of the Dow-Jones Industrial Average for a recent sequence of years. First find the median of the values, then replace each value by A if it is above the median and B if it is below the median. Then apply the runs test to the resulting sequence of As and Bs. What does the result suggest about the stock market as an investment consideration? (Acts of terrorism and adverse economic conditions caused a dramatic drop in the DJIA in 2001.)
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