Project
Your goal is to answer three questions by testing appropriate hypotheses using the appropriate test statistics. Take your time, but please turn this exam in by the due date.
1. Investors often believe the stock market should move in tandem with the economy as a whole. Set up an experiment to test this concept. For your data, use quarterly GDP growth and quarterly S&P return. Use the step by step approach discussed in this course. Hint: Linear regression will get you the answer you need. Just be sure to set the question up correctly.
2. On average, does the S&P return outpace the GDP growth rate? Use the same data as question 1 and the step by step approach to testing this idea. Testing a hypothesis about two means is what is needed here.
3. On average, is the S&P return more volatile than the GDP growth rate? Use the same data and same step by step process. Testing a hypothesis about two variances is the hint for this one. Don't forget to use the right test statistic.