Solution: Consider the monthly stock returns presented in Table 1. Test the hypothesis that average monthly return for the given sample of firms was greater
Question: Consider the monthly stock returns presented in Table 1. Test the hypothesis that average monthly return for the given sample of firms was greater than 4 per cent. Please ensure that you clearly show the following steps.
- Formulate an appropriate null and alternative hypothesis.
- Find the critical region.
- Construct the test statistic.
- Conclude whether you would or you would not reject the null hypothesis at the 5 per cent level of significance.
- State the assumptions underlying the test.
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