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Free CFA-Level-I Exam Braindumps (page: 200)

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Rhonda McLeavon, a quantitative analyst with Churn Brothers Brokerage, has been instructed to perform a statistical analysis to test whether increases in marketing expenses amongst drug companies is positively related to institutional buying of these same companies' common stock. Rhonda begins her analysis and performs the following steps, in succession:

Step 1: Formulating and stating the hypothesis
Step 2: Identifying the appropriate test statistic and probability distribution Step 3: Specifying the significance level
Step 4: Stating the decision rule

Now that these first four steps have been completed, Ms. McLeavon should proceed with which of the following? Choose the best answer.

  1. None of these answers is correct
  2. Collecting the data and performing the calculations
  3. Determining the z-statistic
  4. Determining the p-value
  5. Performing and autocorrelation test to identify any heterskedasticity problems
  6. Evaluating the goodness of fit

Answer(s): B

Explanation:

Hypothesis testing involves a series of seven explicit steps:
Step 1: Formulating and stating the hypothesis
Step 2: Identifying the appropriate test statistic and its probability distribution Step 3: Specifying the significance level
Step 4: Stating the decision rule
Step 5: Collecting the data and performing the necessary calculations Step 6: Making the statistical decision
Step 7: Making the economic/investment decision.



As the size of the sample increases, what happens to the shape of the sampling mean?

  1. Negatively skewed
  2. Cannot be predicted in advance
  3. Positively skewed
  4. None of these answers
  5. Approaches a normal distribution

Answer(s): E

Explanation:

The central limit theorem states that as the sample size gets larger, the sampling distribution of the sample means becomes approximately normal.



The coefficient of variation (CV) for a set of annual incomes is 18%; the coefficient of variation for the length of service with the company is 29%. What does this indicate?

  1. More dispersion in the distribution of the incomes compared with the dispersion of their length of service
  2. Dispersions are equal
  3. Dispersions in the two distributions (income and service) cannot be compared using percents
  4. None of these answers
  5. More dispersion in the lengths of service compared with incomes

Answer(s): E

Explanation:

The CV is the ratio of the standard deviation to the mean, express as a percent. The higher the coefficient, the greater the dispersion.



Carlos Johanson, a quantitative analyst with Eastern Rhodium Institutional Brokerage, has been instructed to perform a regression analysis to test whether the proliferation of neural networks is positively related to the growth of domestic research grants. Mr. Johanson begins the process by formulating and stating a hypothesis. Now that the hypothesis has been explicitly stated, Mr. Johanson should proceed to which of the following steps? Choose the best answer.

  1. Specifying the significance level
  2. Stating the decision rule
  3. Collecting the data and performing the calculations
  4. Identifying the appropriate test statistic and probability distribution
  5. Performing an autocorrelation test

Answer(s): D

Explanation:

Hypothesis testing involves a series of seven explicit steps:
Step 1: Formulating and stating the hypothesis
Step 2: Identifying the appropriate test statistic and its probability distribution Step 3: Specifying the significance level
Step 4: Stating the decision rule
Step 5: Collecting the data and performing the necessary calculations Step 6: Making the statistical decision
Step 7: Making the economic/investment decision.
In this example, Carlos Johanson, a quantitative analyst, has been instructed to perform a regression analysis analyzing the relationship between two sets of variables. Mr. Johanson began his task with the appropriate first step - formulating and stating the hypothesis. The next step in the hypothesis testing process is to identify the appropriate test statistic and its probability distribution.






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