23. The Wall Street Journal\'s Shareholder Scoreboard tracks the performanc retu

Question

23. The Wall Street Journal's Shareholder Scoreboard tracks the performanc retum. O.. companies. The performance of each company is rated based on the annual total return, including stock price changes and the reinvestment of dividends. Ratings are assigned by dividing all 1000 companies into five groups from A (top 20%), B (next 20%), to E (bottom 20% Shown here are the one-year ratings for a sample of 60 of the largest companies. Do the largest companies differ in performance from the performance of the 1000 companies in the Shareholder Scoreboard ? Use -05. 15 20 12

Explanation / Answer

Ans:

Chi square test:

H0:performance of the largest companies does not differ from companies in shareholder scoreboard.

H1:performance of the largest companies differs from companies in shareholder scoreboard.

Test statistic:

Calculated chi square score=11.5

df=5-1=4

critical chi square score for df=4 and alpha=0.05 is 9.488

As,chi square score=11.5>9.488,we reject null hypothesis.

There is sufficent evidence to suggest that performance of the largest companies differs from companies in shareholder scoreboard.

Observed(O) Expected(E) (O-E)^2/E A 5 12 4.083 B 8 12 1.333 C 15 12 0.750 D 20 12 5.333 E 12 12 0 Total= 60 60 11.5

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