An investor wants to compare the risks associated with two different stocks. One way to measure the risk of a given stock is to measure the variation in the stock’s daily price changes.
In an effort to test the claim that the variance in the daily stock price changes for stock 1 is different from the variance in the daily stock price changes for stock 2, the investor obtains a random sample of 21 daily price changes for stock 1 and 21 daily price changes for stock 2.
The summary statistics associated with these samples are: n1 = 21, s1 = .725, n2 = 21, s2 = .529.
If you compute the test value by placing the larger variance in the numerator, at the .05 level of significance, would you conclude that the risks associated with these two stocks are different?
A. No, the test value of 1.371 does not exceed the critical value of 2.12
B. Yes, the p-value associated with this test is 0.0264
C. No, the p-value associated with this test is 0.0528
D. No, the test value of 1.879 does not exceed the critical value of 2.46