In the banking industry, the return on equity ratio or percentage is used to evaluate the financial performance of a bank. Such information is extremely valuable to investors. Please obtain the required data from the attached Excel documents.
Calculate the return on equity (ROE) for a sample of 20 banks for the year before the Sarbanes-Oxley Act was enacted. For the same sample of banks, calculate the ROE for the year following the enactment of the Sarbanes-Oxley Act.
Later, answer the following questions:
•After the enactment of the Sarbanes-Oxley Act, was the average bank's ROE lower than it was before the act? If so, why do you think that was the case?
•What is the null hypothesis for this hypothesis test?
•What is the alternative hypothesis for this hypothesis test?
•Choose at least three different significant levels to conduct the hypothesis test. Is it possible that a Type I error occurred with the hypothesis test? Why or why not?
•Is it possible that a Type II error occurred? Why or why not?
I sort the banks alphabetically, and I am picking the first 20 banks.
These are their ROEs in 2001 and 2003
In a separate excel sheet, we copy these 40 numbers. The average of ...
The return on equity for a sample of 20 banks before and after the Sarbanes-Oxley Act was enacted is calculated. The null and alternative hypothesis for this hypothesis test is provided. The expert chooses at least three different significant levels to conduct hypothesis tests.