Problem Set 5
Problems from Textbook
4.20
Additional Problem
A recent issue of Newsweek featured an article
on California's proposal to stop using the SAT in College admissions. The
article reported the differences in average scores by gender and ethnic group.
However, Newsweek fails to report standard deviations as well as the number
of observations from which the averages were constructed. This makes interpretation
of the differences difficult. The source of Newsweek's information is the College
Board, which reports the
averages and standard deviations as well the
number of students who took the test.
- Is the 3 point difference between the average SAT verbal scores of white
males and white females on statistically significant?
- Is the difference between the population mean scores of white males and
white females significantly greater than 2 points?
- Is the variance in scores among black students significantly greater than
the variance of scores among white students?
Computer Exercise
The dataset returns.txt contains annual data
for following variables:
-
date
-
arsp – annual return on S&P500 index
- ardji – annual return on Dow Jones Industrial Average (DJI) index
-
tbill – per annum interest rate on 3 month treasury bill
Load the data returns.txt to stataquest and do the following
exercises:
- Excess return on a risky portfolio is the difference between the portfolio
return and the return on a riskless bond - e.g. U.S. treasury bill. Calculate
excess returns on S&P500 and DJI.
- Test the hypothesis that excess returns on S&P 500 are different from
zero (use 5% significance).
- Test the hypothesis that excess returns on S&P 500 are different from
excess returns on DJI (use 5% significance).
- Test if the variance of S&P 500 returns is higher than the variance
of DJI returns (use 5% significance).