You complete a runs test on daily data for a thinly traded stock and the Z statistic is 4.55. If the stock has a return of -0.33% late in the trading day and you are convinced that other investors are not aware of the results, based on the runs test results, an investor would: Buy or long the stock in late trading.
You complete a runs test on daily data for a thinly traded stock and the Z statistic is 4.55. If the stock has a return of -0.33% late in the trading day and you are convinced that other investors are not aware of the results, based on the runs test results, an investor would: Buy or long the stock in late trading.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Question
75. You complete a runs test on daily data for a thinly traded stock and the Z statistic is 4.55. If the stock has a return of -0.33% late in the trading day and you are convinced that other investors are not aware of the results, based on the runs test results, an investor would:
- Buy or long the stock in late trading.
- Sell or short the stock in late trading.
- Wait an additional day to buy the stock.
- Wait an additional day to short the stock.
- Take neither a long or short position in the stock.
- None of the above answers is correct.
Expert Solution
Step 1
From the given information,
The Z statistic for the runs test on daily data is Z=4.55.
Null Hypothesis:
H0: There is no stock returns in the late trading day.
Alternative Hypothesis:
H0: Stock price has a return of -0.33% late in the trading day.
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