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**finitehelp****Member**- Registered: 2009-06-21
- Posts: 80

A study of 98 investment advisors asked them to predict the value of a "penny" stock a week ahead. The correlation between the values predicted and the actual value was .20. Was this evidence that they could predict penny stock performance?

a) state the null and alternative hypotheses about the correlation

b) calculate the test statistic

c) perform the test at significance level of .05

You are testing the null hypothesis that there is no linear relationship between two variables, X and Y. From your sample of n=8, you determine that b1=+4.5 and Sb1=1.5.

d) what is the value of tstat?

e) at the .05 level of significance, what are the critical values?

f) based on your answers to (c) and (d), what statistical decision should you make?

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