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 ? = 19.4 . A random sample of 36 “socially conscious” stocks gave a P/E ratio sample mean of ?̅= 17.9, with sample standard deviation ? = 5.2 (Reference: Morningstar, a financial analysis company in Chicago). 2.2.1. 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 ? = 0.05 [6 marks] 2.2.2. What is the P-value?

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
icon
Related questions
Topic Video
Question

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
? = 19.4 . A random sample of 36 “socially conscious” stocks gave a P/E ratio sample mean of ?̅= 17.9,
with sample standard deviation ? = 5.2 (Reference: Morningstar, a financial analysis company in Chicago). 2.2.1. 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 ? = 0.05 [6 marks]
2.2.2. What is the P-value?

 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Hypothesis Tests and Confidence Intervals for Means
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, statistics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman