Mutual fund A claims that it had better performance than mutual fund B in terms of volatility over a 10-year period. The 19 observations show that the sum of the investment returns of mutual fund A equals 249.73 and the sum of the squared investment returns equals 5572.86. The volatility (quantified by the variance)for mutual fund B is 11.67. Test whether the claims of mutual fund A are supported by the data. Use 5% level of significance. Motivate your choice for the alternative hypothesis.
Inverse Normal Distribution
The method used for finding the corresponding z-critical value in a normal distribution using the known probability is said to be an inverse normal distribution. The inverse normal distribution is a continuous probability distribution with a family of two parameters.
Mean, Median, Mode
It is a descriptive summary of a data set. It can be defined by using some of the measures. The central tendencies do not provide information regarding individual data from the dataset. However, they give a summary of the data set. The central tendency or measure of central tendency is a central or typical value for a probability distribution.
Z-Scores
A z-score is a unit of measurement used in statistics to describe the position of a raw score in terms of its distance from the mean, measured with reference to standard deviation from the mean. Z-scores are useful in statistics because they allow comparison between two scores that belong to different normal distributions.
Step by step
Solved in 3 steps