Mutual-fund performance. Mutual funds often compare their performance with S

T E

P a benchmark provided by an “index” that describes the performance of the class of assets in which the fund invests. For example, the Vanguard International Growth Fund benchmarks its performance against the EAFE (Europe, Australasia, Far East)

index. Table 17.4 gives annual returns (percent) for the fund and the index. Does the fund’s performance differ significantly from that of its benchmark?

(a) Explain clearly why the matched pairs t test is the proper choice to answer this question.

(b) Do a complete analysis that answers the question posed.

TABLE 17.4 A mutual fund versus its benchmark index FUND INDEX FUND INDEX YEAR RETURN RETURN YEAR RETURN RETURN 1984 −1.02 7.38 1996 14.65 6.05 1985 56.94 56.16 1997 4.12 1.78 1986 56.71 69.44 1998 16.93 20.00 1987 12.48 24.63 1999 26.34 26.96 1988 11.61 28.27 2000 −8.60 −14.17 1989 24.76 10.54 2001 −18.92 −21.44 1990 −12.05 −23.45 2002 −17.79 −15.94 1991 4.74 12.13 2003 34.45 38.59 1992 −5.79 −12.17 2004 18.95 20.25 1993 44.74 32.56 2005 15.00 13.54 1994 0.76 7.78 2006 25.92 26.34 1995 14.89 11.21 2007 15.98 11.17