Page 8 - FINAL CFA I SLIDES JUNE 2019 DAY 4

0.1% - 0

Example, p277/279: 2 vs 1-tailed test: A researcher has gathered data on the daily returns on a portfolio of call options over a recent
250-day period. The mean daily portfolio return has been 0.1% (based on same sample drawn), and the sample SD is 0.25%. The
researcher believes that the mean daily portfolio return is not equal to zero. Construct a hypothesis test of the researcher’s belief:
2TT, p277 1TT, p279

Same!

Test- Same!
stats

Since 6.33 > 1.96, the sample value is significantly Same!
different from the hypothesized value

Reject the Ho that the mean daily option return = 0.
Same!
The mean daily return of 0.001 is statistically
different from 0 given the sample’s standard Always same?
deviation and size.
Why z, and not t? Statistics could be 1.78?
2TT - Fail to Reject

Sample ≥ 30; far up to 250!? At infinite df, t & z same, anyway! 1TT – Reject (Type 1 & 2 Errors)