Quantitative Finance And Financial Markets Harvard Case Solution & Analysis

Question 1
a).
The independent sample t test has been performed assuming unequal variances and the results are shown below:
T-Test of Differences Between Two Means(Unequal variances)

Mean Group 1 55485
S Group 1 10000
n Group 1 150
df Group 1 149
Mean Group 2 45846
S Group 2 9000
n Group 2 350
df Group 2 349
Hypothesized Difference 1000
a 0.05
Total df 257.1729836

Difference in Sample Means 9639
T-Test Statistic 9.115957194 Confidence Interval 7772.79524 11505.20476
Two-Tailed Test Margin of error 1866.20476
Lower Critical Value -1.969237496
Upper Critical value 1.969237496
p-value 2.30332E-17
Decision Reject Ho
One-tailed Test (Left Tail)
Lower Critical Value -1.65080425
p-value 1 IF calculations
Decision Do not reject Ho TDIST calculation 1.1517E-17
One-Tailed test (Right Tail) 1-TDIST calculation 1
Upper Critical Value 1.65080425
p-value 1.15166E-17
Decision Reject Ho
Since, the p value for two tailed and right tail is less than level of significance of 0.05 therefore, the median income of men buying home is more than $ 10,000 larger than that of women and difference is significant.
b).
Additional assumptions that are required to validate the results in part A is the mean incomes of men and women as we have not been provided with mean incomes but median values. Secondly, the standard deviations are absolute values however, this is not practical and it should be ensured that we are using sample standard deviations. Lastly, the sample size should be same for men and women. After correcting these assumptions, we need to test the difference again.
Quantitative Finance And Financial Markets Harvard Case Solution & Analysis

Question 2
a).
The hypothesis of interest would be as follows:
H0: There is no relationship between employment sector and investing preference.
H1: There is a significant relationship between employment sector and investing preference.
We have applied the chi square test to test the above hypothesis. The results of the test are as follows:
Number of Rows (R) 2 Level of Significance 1%
Number of Columns (C ) 2
RESULTS*
Chi-square Statistic 11.161
P-value 0.001
b).
There is a significant association between employment sector and investing preference as the p value is less than the level of significance of 1%.
c).
The p value for the hypothesis test conducted in part a is 0.001.
Question 3
a).
The regression results and the regression equation are as follows:
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.9939
R Square 0.9879
Adjusted R Square 0.9866
Standard Error 14.9772
Observations 11

ANOVA
df SS MS F Significance F
Regression 1 165103.3355 165103.3355 736.0293 0.0000
Residual 9 2018.8463 224.3163
Total 10 167122.1818

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 8.3564 6.9106 1.2092 0.2574 -7.2763 23.9892 -7.2763 23.9892
Computer Generated Account Balance (X) 0.8967 0.0331 27.1299 0.0000 0.8219 0.9714 0.8219 0.9714

Regression Equation
Y = 9.356 + 0.896X + e
b).
Y = 9.356 + 0.896 (100)
Y = 98.956 would be the balance on actual account
c).

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