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Example of one sample t-test

A share tipping service claims that its selections give an average return of 10% if held for 12 months. An investor wants to investigate this claim and records the returns of the last 20 shares that have met the 12 month period. The sample mean return is 9% and the standard deviation is 2.5%. You can assume that the return from the shares that the company tips has a normal distribution.

i) Construct a suitable hypothesis test for this investigation.

ii) Test whether you would reject the null hypothesis at the 0.05 significance
level and comment on your result.

Please do not use excel functions - I would like to see clear workings and commentary for calculations

Solution Preview

A share tipping service claims that its selections give an average return of 10% if held for 12 months. An investor wants to investigate this claim and records the returns of the last 20 shares that have met the 12 month period. The sample mean return is 9% and the ...

Solution Summary

In this solution, we present an example of conducting a one sample t-test.

$2.19