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A portfolio manager advertises that its portfolio monthly returns have a standard deviation equal to 3%. You want to verify whether this claim is valid
- A portfolio manager advertises that its portfolio monthly returns have a standard deviation equal to 3%. You want to verify whether this claim is valid or not. You collect monthly returns for the last three years and measures the standard deviation of 3.7%.
- State the Null and alternative Hypotheses.
- Assuming that the portfolio's returns are normally distributed, determine if the calculated standard deviation is different than the advertised one at a 5% level of significance.
- Make a decision based on the results of the test.
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