Question of the Week

A manager is claiming that her stock picks, on average, outperform the S&P 500 by 3.3% per year. A competitor decides to test the validity of this statement by examining the past performance of 25 of the 200 stocks that this manager has purchased over the last year. The mean of the sample was only 2.8% while its standard deviation was 4.5%. With a level of significance of 5%, what conclusion best describes this manager's claims?

a) Since the t-calc of -1.27 is within the acceptance range of -2.064 and 2.064, the manager's claim cannot be rejected.
b) Since the t-calc of -.56 is within the acceptance range of -2.086 and 2.086, the manager's claim cannot be rejected.
c) Since the t-calc of -1.27 is within the acceptance range of -2.086 and 2.086, the manager's claim cannot be rejected.
d) Since the t-calc of -.56 is within the acceptance range of -2.064 and 2.064, the manager's claim cannot be rejected.

Answer:

The correct answer is: d)



2005 CFA Level 1 LOS: 3.1.B.m