A research analyst follows the monthly price data for the Dow Jones Industrial Average for the years 2008-2010. The accompanying table shows a portion of the price data. The analyst wants to test the random-walk hypothesis that suggests that prices move randomly over time with no discernible pattern.

Date................................ Adjusted Closing Price

1/2/2008........................................... 12,650.36

2/1/2008........................................... 12,266.39

⋮............................................................... ⋮

12/1/2010........................................... 11,577.51

a. Use the method-of-runs above and below the median to test the null hypothesis of randomness against the alternative that there is a trend or cyclical pattern at the 5% significance level.

b. Can the research analyst conclude that the movement of the Dow Jones Industrial Average is consistent with the random-walk hypothesis?