You are interested in whether the returns on Asset A are negatively correlated with the returns on
Question:
You are interested in whether the returns on Asset A are negatively correlated with the returns on Asset B. Consider the following annual return data on the two assets:
........................Asset A....................... Asset B
Year 1...................-20%...................................... 8%
Year 2 .......................-5.................................... 5
Year 3....................... 18.................................. -1
Year 4....................... 15.................................. -2
Year 5......................... 4.................................... 3
Year 6..................... -12.................................... 2
a. Calculate and interpret the Spearman rank correlation coefficient rs .
b. Specify the competing hypotheses to determine whether the Spearman rank correlation coefficient is less than zero.
c. At the 1% significance level, specify the critical value.
d. What is the conclusion to the test? Are the returns negatively correlated?
Step by Step Answer:
Business Statistics Communicating With Numbers
ISBN: 9780078020551
2nd Edition
Authors: Sanjiv Jaggia, Alison Kelly