When Institutional Money Managers Use Their Computers to Decide on Large

question 174

Multiple Choice

When institutional money managers use their computers to decide on large sales or purchases in the stock market, they are employing

• A)the herd instinct.
• B)the bandwagon effect.
• C)program trading.
• D)stock watering.

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Definitions:

Type I Error

The mistake of rejecting the null hypothesis when it is actually true, commonly referred to as a "false positive" result.

Alpha (α)

A pre-specified significance level in hypothesis testing, representing the probability of making a Type I error, or falsely rejecting the null hypothesis.

Hypothesis Test

A statistical method used to determine if there is enough evidence in a sample of data to infer that a certain condition holds true for the entire population.

Reject

In statistical analysis, to refuse the null hypothesis based on the evidence provided by the test statistic.