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Question
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. The investor obtains a random sample of 20 daily price changes for stock 1 and 20 daily price changes for stock 2. These data are shown in the table below. Show how this investor can compare the risks associated with the two stocks by testing the null hypothesis that the variances of the stocks are equal. Use
= 0.10 and interpret the results of the statistical test.| Day | Price Change for stock 1 | Price Change for stock 2 |
| 1 | 1.86 | 0.87 |
| 2 | 1.80 | 1.33 |
| 3 | 1.03 | -0.27 |
| 4 | 0.16 | -0.20 |
| 5 | -0.73 | 0.25 |
| 6 | 0.90 | 0.00 |
| 7 | 0.09 | 0.09 |
| 8 | 0.19 | -0.71 |
| 9 | -0.42 | -0.33 |
| 10 | 0.56 | 0.12 |
| 11 | 1.24 | 0.43 |
| 12 | -1.16 | -0.23 |
| 13 | 0.37 | 0.70 |
| 14 | -0.52 | -0.24 |
| 15 | -0.09 | -0.59 |
| 16 | 1.07 | 0.24 |
| 17 | -0.88 | 0.66 |
| 18 | 0.44 | -0.54 |
| 19 | -0.21 | 0.55 |
| 20 | 0.84 | 0.08 |
Answer
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