You are wondering whether a firm has "Quadrophia", and have decided to work through the math. In particular, you are wondering how many consecutive quarters of not "reporting" a "4" in the "third digit" of earnings announcement you would have to observe before you conclude that something "non-random" is going on. Assuming that you are suspicious if the likelihood of a particular pattern of third digits is less than 5%. Further, assume you believe that, in the absence of management intervention, that the likelihood of reporting any third digit is equally probable. Based on these assumptions.

How many consecutive quarters of not observing a "4" as the "third digit" would you have to observe before you concluded that something "non-random" was taking place?

Answer rating: 100% (QA)

Under the assumption that the likelihood of reporting any third digit is equally pr... View the full answer