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Testing of Hypothesis

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On Friday, Wall Street traders were anxiously awaiting the federal government's release of numbers on the January increase in nonfarm payrolls. The early consensus estimate among economists was for a growth of 250,000 new jobs (CNBC, February 3, 2006). However, a sample of 20 economists taken Thursday afternoon provided a sample mean of 266,000 with a sample standard deviation of 24,000. Financial analysts often call such a sample mean, based on late-breaking news, the "whisper number". Treat the "consensus estimate" as the population mean. Conduct a hypothesis test to determine whether the whisper number justifies a conclusion of a statistically significant increase in the consensus estimate of economists. Use ? = .01 as the level of significance.

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The solution explains a testing of hypothesis problem from financial economics.

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