Which of the Following Statements Is Most Correct

question 2

Multiple Choice

Which of the following statements is most correct?

• A) If you were testing dividend theories and found that a dividend increase resulted in higher stock prices, then you could rule out all other theories and conclude that the bird-in-the-hand theory was most consistent with the evidence you found.
• B) The clientele effect suggests that investors choose their investments based on firms' past dividend policies and changes to established dividend policies may be costly to investors.
• C) Dividends paid under a residual dividend policy might send conflicting signals to investors.
• D) Both statements b and c are correct.
• E) All of the statements above are correct.

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Definitions:

Type I Error

The mistaken dismissal of a correct null hypothesis, often referred to as a "false positive."

Null Hypothesis

A statement or premise in statistics that implies no significant effect or relationship between variables, serving as a default position until evidence suggests otherwise.

Alternative Hypothesis

The hypothesis that contradicts the null hypothesis, typically proposing a new effect, difference, or relationship.

P-Value

The likelihood of achieving outcomes in a test that are at least as significant as those observed, under the assumption that the null hypothesis holds true.