Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi can you explain these please. Question 2. Economists believe that asset markets sometimes take the stairs or; and the elevator down. That is, periods

Hi can you explain these please.

image text in transcribed
Question 2. Economists believe that asset markets sometimes take the stairs or; and the elevator down. That is, periods of slowly rising asset prices are interspersed with occasional crashes. Suppose after examining monthly data in a particular market. in two-day segments to control for dependence between days due to time zones, a business economist concludes that the probability of the market taking a small positive step each pair of days is Binomial: I ~ HinEn,p} with n = 15 and p = I115. The n=15 covers a month because each draw is a 2-day pair. Since it is Binomial you can assume that the ttchange each pair of days is independent from any other pair. 1. Compute PUE = 10), using the pdf formula. 2. Compute P{X E 14), using the binomial table. 3. Verify your answers using Excel. 4. Why is the assumption of independence of day-pairs important in the Binomial formula that the business economist uses [you may like to use the example of tossing a coin twice to help explain}

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Non-Cooperative Game Theory

Authors: Takako Fujiwara Greve

1st Edition

4431556451, 9784431556459

More Books

Students also viewed these Mathematics questions

Question

1. Information that is currently accessible (recognition).

Answered: 1 week ago