SOLUTION: 15. Some financial theoreticians believe that the stock market's daily prices constitute a "random walk with positive drift." If this is accurate, then the Dow Jones Industrial Ave

Question 634576: 15. Some financial theoreticians believe that the stock market's daily prices constitute a "random walk with positive drift." If this is accurate, then the Dow Jones Industrial Average should show a gain on more than 50% of all trading days. The average increased on 101 of 175 randomly chosen days. If = 5%, what do you think about the suggested theory? Question 15 options:
Since the critical Z value is 1.645, we are going to reject the null hypothesis. At =5%, the data does not provide significant support for the theory.
Since the critical Z value is 1.645, we are going to reject the null hypothesis. At =5%, the data does provide significant support for the theory.
Since the critical Z value is 1.645, we are going to fail to reject the null hypothesis. At =5%, the data does not provide significant support for the theory.
Since the critical t value is 2.364, we are going to reject the null hypothesis. At =5%, the data does not provide significant support for the theory.

Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Some financial theoreticians believe that the stock market's daily prices constitute a "random walk with positive drift." If this is accurate, then the Dow Jones Industrial Average should show a gain on more than 50% of all trading days. The average increased on 101 of 175 randomly chosen days.
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p-hat = 101/175 = 0.5771
z(0.58) = (0.58-0.50)/sqrt[0.5*0.5/175] = 2.1166
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Ho: p <= 0.5
Ha: p > 0.5(claim)

If = 5%, what do you think about the suggested theory? Question 15 options:
Ans: Since the critical Z value is 1.645, we are going to reject Ho.
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Cheers,
Stan H.

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