Socially conscious investors screen out stocks of alcohol and tobacco makers, firms with poor environmental records, and companies with poor labor practices. Some examples of "good," socially conscious companies are Johnson and Johnson, Dell Computers, Bank of America, and Home Depot. The question is, are such stocks overpriced? One measure of value is the P/E, or price-to-earnings ratio. High P/E ratios may indicate a stock is overpriced. For the S&P Stock Index of all major stocks, the mean P/E ratio is µ = 19.4. A random sample of 36 "socially conscious" stocks gave a P/E ratio sample mean of x = 17.8, with sample standard deviation s = 5.6. Does this indicate that the mean P/E ratio of all socially conscious stocks is different (either way) from the mean P/E ratio of the S&P Stock Index? Use a = 0.05. (a) What is the level of significance? State the null and alternate hypotheses. O Ho: H> 19.4; H;: µ = 19.4 Ο Hρ : μt 19.4; H: μ = 19.4 O Ho: H = 19.4; H;: µ > 19.4 Ο H0: μ- 19.4; H μ< 19.4 O Ho: H = 19.4; H¸: µ # 19.4 (b) What sampling distribution will you use? Explain the rationale for your choice of sampling distribution. O The Student's t, since the sample size is large and o is known. O The standard normal, since the sample size is large and o is known. O The standard normal, since the sample size is large and o is unknown. O The Student's t, since the sample size is large and o is unknown. What is the value of the sample test statistic? (Round your answer to three decimal places.)
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
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