Suppose that an investor wants to compare the risks associated with two different stocks One way to measure the risk of a given stock is to measure the variation in the stocks daily price changes The investor obtains a random sample of 25 daily price changes for stock 1 and 25 daily price changes f...

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Suppose that an investor wants to compare the risks associated with two different stocks. One way to

Question:

Suppose that an investor wants to compare the risks associated with two different One way to measure the risk of a given stock is to measure the variation in the daily price changes. The investor obtains a random sample of 25 daily price changes for stock 1 and 25 daily price changes for stock 2. These data are provided in the file P09_20.xlsx. Explain why this investor can compare the risks associated with the two by testing the null hypothesis that the variances of the price changes are equal. Perform this test, using a 10% significance level, and interpret the results.

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...