In 42 of the 66 years from 1950 through 2016 (in 2011 there was virtually no change), the S&P 500 finished higher after the first five days of trading. In 37 out of 42 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 66-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 2017 and the 2017 annual performance of the S&P 500 at finance.yahoo .com. Comment on the results.

Transcribed Image Text:

FIRST WEEK Higher Lower S&P 500'S ANNUAL PERFORMANCE Higher Lower 37 5 12 12