- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 11. Hypothesis Tests Concerning a Single Variance

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**CFA Practice Question**

Consider the following information about a fund. The fund has been in existence for 3 years. Over this period it has achieved a mean monthly return of 3% with a sample standard deviation of monthly returns of 5%. It was expected to earn a 2.5% mean monthly return over the 3-year period.

You want to test a claim that the investment disciplines of the fund result in a standard deviation of monthly returns of less than 6%.

The test statistic for conducting this hypothesis test is a ______.

A. t-test with 35 degrees of freedom

B. F-test with 35 degrees of freedom

C. chi-square test with 35 degrees of freedom

**Explanation:**The test statistic is chi-square with 36-1 = 35 degrees of freedom.

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**User Contributed Comments**
3

User |
Comment |
---|---|

Pooh |
testing if variance from a single population is statistically different from a hypothesized variance (standard deviation). |

Profache |
Use Chi-Square for tests concerning a single population variance. Use F-test for tests concerning variances of two populations. |

bdilindi |
Why not t-test vs X^2 test though? |