Financial Risk Manager Part 1
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If a researcher wants to test that the mean return of 50 small-cap stocks from the Singapore Exchange is greater than 14%, which of the following would be the alternative hypothesis for the test?
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A
H₁ : μ ≠ 14%
B
H₁ : μ > 14%
C
H₁ : μ < 14%
D
H₀ : μ < 14%
Explanation:
Since the researcher wants to test that if the mean of 50 small-cap stocks is greater than 14%, the null hypothesis is H₀ : μ ≤ 14% and the alternative hypothesis is H₁ : μ > 14%. We always want to reject the null hypothesis and accept the alternative. Since the researcher wants to prove that the mean returns are greater than 14%, the alternative hypothesis is H₁ : μ > 14%.
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