The beta coefficient of a stock is a measure of the stock's volatility (or risk) relative to

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The "beta coefficient" of a stock is a measure of the stock's volatility (or risk) relative to the market as a whole. Stocks with beta coefficients greater than 1 generally bear greater risk (more volatility) than the market, whereas stocks with beta coefficients less than 1 are less risky (less volatile) than the overall market

(Alexander, Sharpe, and Bailey, Fundamentals of Investments, 1993). A random sample of 15 hightechnology stocks was selected at the end of 1996, and the mean and standard deviation of the beta coefficients were calculated: T = 1.23, s = .37

a. Set up the appropriate null and alternative hypotheses to test whether the average high technology stock is riskier than the market as a whole.

b. Establish the appropriate test statistic and rejection region for the test. Use a = .lo.

c. What assumptions are necessary to ensure the validity of the test?

d. Calculate the test statistic and state your conclusion.

e. Interpret the p-value on the SAS computer output shown here. (Prob > IT on the SAS printout corresponds to a two-tailed test of the null hypothesis p = 1.)

f. If the alternative hypothesis of interest is p > 1, what is the appropriate p-value of the test?
SAS Output for Exercise 6.91 Analysis Variable : BETA-1

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Statistics For Business And Economics

ISBN: 9780130272935

8th Edition

Authors: James T. McClave, Terry Sincich, P. George Benson

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