You don't need to be rich to buy a few shares in a mutual fund. The question is, how reliable are mutual funds as investments? This depends on the type of fund you buy. The following data are based on information taken from a mutual fund guide available in most libraries. A random sample of percentage annual returns for mutual funds holding stocks in aggressive-growth small companies is shown below.
You don't need to be rich to buy a few shares in a mutual fund. The question is, how reliable are mutual funds as investments? This depends on the type of fund you buy. The following data are based on information taken from a mutual fund guide available in most libraries.
A random sample of percentage annual returns for mutual funds holding stocks in aggressive-growth small companies is shown below.
| -1.5 | 14.4 | 41.4 | 17.4 | -16.5 | 4.4 | 32.6 | -7.3 | 16.2 | 2.8 | 34.3 |
| -10.6 | 8.4 | -7.0 | -2.3 | -18.5 | 25.0 | -9.8 | -7.8 | -24.6 | 22.8 |
Use a calculator to verify that s2 ≈ 347.521 for the sample of aggressive-growth small company funds.
Another random sample of percentage annual returns for mutual funds holding value (i.e., market underpriced) stocks in large companies is shown below.
| 16.4 | 0.6 | 7.1 | -1.8 | -3.9 | 19.4 | -2.5 | 15.9 | 32.6 | 22.1 | 3.4 |
| -0.5 | -8.3 | 25.8 | -4.1 | 14.6 | 6.5 | 18.0 | 21.0 | 0.2 | -1.6 |
Use a calculator to verify that s2 ≈ 137.630 for value stocks in large companies.
Test the claim that the population variance for mutual funds holding aggressive-growth in small companies is larger than the population variance for mutual funds holding value stocks in large companies. Use a 5% level of significance. How could your test conclusion relate to the question of reliability of returns for each type of mutual fund?
What are the degrees of freedom?
| dfN | |
| dfD |
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