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T-test: earnings per share for major companies

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StreetInsider.com reported 2002 earnings per share data for a sample of major companies (Feb. 12, 2003) Prior to 2002, financial analysts predicted the 2002 earnings per share for these same companies (Barron's Sep. 10, 2001) Use the following data to comment on differences between actual and estimated earnings per share.

Company Actual Predicted

AT&T 1.29 0.38

American Express 2.01 2.31

Citigroup 2.59 3.43

Coca-Cola 1.60 1.78

DuPoint 1.84 2.18

Exxon-Mobil 2.72 2.19

General Electric 1.51 1.71

Johnson & Johnson 2.28 2.18

McDonald's 0.77 1.55

Wal-Mart 1.81 1.74

a. Use a= .05 and test for any difference between the population mean actual and population meanpredicted earnings per share. What is the p-value? What is your conclusion?

b. What is the point estimate of the difference between the two means? Did the analysts tend to underestimate or overestimate the earnings?

c. At 95% confidence, what is the margin of error for the estimae in part(b)? What would you recommend based on this information?

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This solution contains explanations and calculations with regards to statistically testing the difference between earnings per share for some major companies.

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