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Concept explainers
Uses
Hypothesis Testing with Two Samples Hypothesis testing enables you to determine whether differences in samples indicate actual differences in populations or are merely due to sampling error. For instance, a study conducted on about 1400 American children in a variety of settings compared the behavior of the children who attended day care with the behavior of those who stayed home. Aggressive behavior such as stealing toys, pushing other children, and starting fights was measured in both groups. The study showed that children who attended day care for more than 30 hours per week were about three times more likely to be aggressive than those who stayed home. Although the aggressive behavior observed in the study was well within the normal
Abuses
Confounding Variables The U.S. study found that the results were the same regardless of quality of the day care center and income of the family. However, the overall quality of care experienced by most of the children studied could be the problem—a survey of American day care centers that measured aspects such as number and expertise of caregivers found that only 10 percent of American day care centers provided high-quality care.
A similar study of preschoolers and aggressive behavior in Norway, where day care centers are subject to strict standards and the ratio of adult caregivers to children is high, found that the link between day care attendance and aggressive behavior was minimal. Another Norwegian study included an additional variable, differences between siblings, and found no relationship between day care attendance and behavior problems. These additional variables that are often out of the researcher’s control are known as confounding variables.
Study Funding A series of studies was conducted on various methods for reducing the number of cigarettes that smokers smoke. The study compared smokers who were simply told to smoke less and those who tried methods such as nicotine replacement therapy, electronic cigarettes, and using reduced tar, carbon, or nicotine cigarettes. Some methods were shown to be effective in reducing the number of cigarettes smoked.
Some of the studies were funded by the tobacco industry, which could profit from promoting strategies other than quitting as beneficial to smokers’ health. When dealing with statistics, it is always good to know who is paying for a study, and whether the researchers are unbiased.
1. Confounding Variables A pharmaceutical company has applied for approval to market a new arthritis medication. The research involved a test group that was given the medication and another test group that was given a placebo. Describe some possible confounding variables that could influence the results of the study.
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To describe: The possible confounding variables that could influence the results of the study.
Answer to Problem 1UA
The possible confounding variables that could influence the results of the study are age and medical report.
Explanation of Solution
Given info:
The study based on the pharmaceutical company has applied for the approval to market a new arthritis medication.
Justification:
Confounding variable:
Confounding variable is a third variable that is associated with explanatory and response variables. In other words, confounding variable influences the response variable.
Here, the possible confounding variables that could influence the results of the study are age and medical report.
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Chapter 8 Solutions
Elementary Statistics: Picturing the World (7th Edition)
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- Please solving problem2 Problem1 We consider a two-period binomial model with the following properties: each period lastsone (1) year and the current stock price is S0 = 4. On each period, the stock price doubleswhen it moves up and is reduced by half when it moves down. The annual interest rateon the money market is 25%. (This model is the same as in Prob. 1 of HW#2).We consider four options on this market: A European call option with maturity T = 2 years and strike price K = 5; A European put option with maturity T = 2 years and strike price K = 5; An American call option with maturity T = 2 years and strike price K = 5; An American put option with maturity T = 2 years and strike price K = 5.(a) Find the price at time 0 of both European options.(b) Find the price at time 0 of both American options. Compare your results with (a)and comment.(c) For each of the American options, describe the optimal exercising strategy.arrow_forwardProblem 1.We consider a two-period binomial model with the following properties: each period lastsone (1) year and the current stock price is S0 = 4. On each period, the stock price doubleswhen it moves up and is reduced by half when it moves down. The annual interest rateon the money market is 25%. We consider four options on this market: A European call option with maturity T = 2 years and strike price K = 5; A European put option with maturity T = 2 years and strike price K = 5; An American call option with maturity T = 2 years and strike price K = 5; An American put option with maturity T = 2 years and strike price K = 5.(a) Find the price at time 0 of both European options.(b) Find the price at time 0 of both American options. Compare your results with (a)and comment.(c) For each of the American options, describe the optimal exercising strategy.(d) We assume that you sell the American put to a market participant A for the pricefound in (b). Explain how you act on the market…arrow_forwardWhat is the standard scores associated to the left of z is 0.1446arrow_forward
- Note: The purpose of this problem below is to use computational techniques (Excelspreadsheet, Matlab, R, Python, etc.) and code the dynamic programming ideas seen inclass. Please provide the numerical answer to the questions as well as a sample of yourwork (spreadsheet, code file, etc.).We consider an N-period binomial model with the following properties: N = 60, thecurrent stock price is S0 = 1000; on each period, the stock price increases by 0.5% whenit moves up and decreases by 0.3% when it moves down. The annual interest rate on themoney market is 5%. (Notice that this model is a CRR model, which means that thebinomial tree is recombining.)(a) Find the price at time t0 = 0 of a (European) call option with strike price K = 1040and maturity T = 1 year.(b) Find the price at time t0 = 0 of a (European) put option with strike price K = 1040and maturity T = 1 year.(c) We consider now, that you are at time t5 (i.e. after 5 periods, which represents 1month later). Assume that the stock…arrow_forwardshow work in paperarrow_forwardshow all work (...or what you entered into your calculator...)arrow_forward
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