Question: An investment firm has a research section that predicts next year's earnings per share for several hundred companies. The actual earnings per share one year later is obtained for a random sample of these companies and compared with the research section's estimate. The results are available in the file “Question 1 Data”.

Test the hypothesis that the predictions of the research section are on average neither optimistic nor pessimistic, using significance level 0.05.

What are the assumptions underlying the test you have used, and what steps have you taken to verify that these assumptions are valid in this case? If any assumptions are not valid report on any additional analyses have you performed to assess the robustness of your conclusions.