- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 10. Hypothesis Tests Concerning Mean Differences (Paired Comparisons Test)

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**CFA Practice Question**

The table below is a summary of results obtained by an analyst who examined the investment strategy in 20 stocks with the highest yields in the ABC Average versus a buy-and-hold strategy in all 40 stocks of the DEF.

ABC, 17.78%, 23.87

DEF, 12.76,% 15.65

Difference, 5.02%, 8.22

B. the samples are mutually exclusive.

C. the samples are dependent.

Strategy, Mean Return, Standard Deviation

ABC, 17.78%, 23.87

DEF, 12.76,% 15.65

Difference, 5.02%, 8.22

We are testing the null and alternative hypotheses consistent with a two-sided test that the mean difference between the ABC and DEF strategies equals 0. A hypothesis test concerning differences between means is appropriate because ______

A. the samples are independent.

B. the samples are mutually exclusive.

C. the samples are dependent.

Correct Answer: A

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**User Contributed Comments**
5

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

TheHTrader |
Noted the difference between this and similarly same question from the previous section - "40 years." |

Shaan23 |
Now my comment from the last section makes little sense. Why is this an independent sample? Stocks are dependent and paired comparison should be used. |

shann680 |
this question and the one prior from the last LOS should be swapped. AN have clearly done this intentionally to confuse us. The missing buzz word this time round was "40 years" = DEPENDENT (paired mean difference). No time frame = INDEPENDENT (difference in between means with unknown population variances). please come clarify and correct me if i'm heinously wrong! sorry to confuse if so the case!) |

CJHughes |
Independence is the conclusion I draw here based on fact its two completely different strategies deployed using stocks from two different indexes. |

obuyajosh |
What to note first is the sample sizes (if different, then independent) and before and after comparison (if none, then independent). |