Let Positive Daily S&P 500 Returns Define Up Days, and Negative

question 32

Essay

Let positive daily S&P 500 returns define up days, and negative daily S&P 500 returns define down days. A stockbroker wants to know if the up and down days of the S&P 500 occur randomly. For 30 trading days, there were 17 up days, 13 down days, four runs of up days, and four runs of down days.
A) Specify the competing hypotheses to determine whether the S&P 500 up and down days occur at random.
B) What is the value of the Wald-Wolfowitz runs test statistic?
C) At the 5% significance level, what is the decision and conclusion?

• A) Specify the competing hypotheses to determine whether the S&P 500 up and down days occur at random.
• B) What is the value of the Wald-Wolfowitz runs test statistic?
• C) At the 5% significance level, what is the decision and conclusion?

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Definitions:

Black Markets

Underground economies where goods or services are traded illegally, bypassing official regulations or laws.

Convertibility

The ease with which one currency can be exchanged for another, indicating how freely a country's currency can be traded on the international market.

Tax Levied

Refers to the imposition of taxes by a governing authority on individuals, corporations, or properties to generate revenue for public expenditures.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specific time frame.