A research analyst follow s the monthly price data for the Dow Jones Industrial Average for the years 2008- 2010. The accompanying table shows a portion of the price data; the full data set, labeled Dow Jones, can be found on the text website. The analyst wants to test the random walk hypothesis that suggests that prices move randomly over time with no discernible pattern.
a. Use the method-of-runs above and below the median to test the null hypothesis of randomness against the alternative that there is a trend at the 5% significance level.
b. Can the research analyst conclude that the movement of the Dow Jones Industrial Average is consistent with the random-walk hypothesis?