Discuss the below:
Q1. An investor who can correctly forecast the direction and size of changes in foreign currency exchange rates is able to reap large profits in the international currency markets. Predictions from 216 investors, together with the subsequent actual directions of change were recorded
(Column 1: "predicted change" where 1 = positive and 2 = negative; Column 2: "actual change" where 1 = positive and 2 = negative.)
a) Test the hypothesis (with alpha = .05) that a relationship exists between the predicted and actual direction of change.
b) To what extent would you make use of these predictions in formulating your forecasts of future exchange rate changes?
(Data is: (1,1): 67 (1,2): 64, and (2,1): 39 (2,2): 46)