- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 8. Hypothesis Testing
- Subject 10. Testing Concerning Tests of Variances (Chi-Square Test)
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.
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? |