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Statistics for Business and Economics | 12th Edition | ISBN: 9780321826237 | Authors: James T. McClave, P. George Benson, Terry T Sincich
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Solved: Stock market participation and IQ. Refer to The

Chapter 4, Problem 34E

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QUESTION:

Stock market participation and IQ. Refer to The Journal of Finance (December 2011) study of whether the decision to invest in the stock market is dependent on IQ, Exercise 3.42 (p. 153). Recall that an IQ score (from a low score of 1 to a high score of 9) was determined for each in a sample of 158,044 Finnish citizens. Also recorded was whether or not the citizen invested in the stock market. The accompanying table gives the number of Finnish citizens in each IQ score/ investment category. Which group of Finnish citizens (market investors or noninvestors) has the highest average IQ score?

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QUESTION:

Stock market participation and IQ. Refer to The Journal of Finance (December 2011) study of whether the decision to invest in the stock market is dependent on IQ, Exercise 3.42 (p. 153). Recall that an IQ score (from a low score of 1 to a high score of 9) was determined for each in a sample of 158,044 Finnish citizens. Also recorded was whether or not the citizen invested in the stock market. The accompanying table gives the number of Finnish citizens in each IQ score/ investment category. Which group of Finnish citizens (market investors or noninvestors) has the highest average IQ score?

ANSWER:

Solution

Step 1 of 2

We have to find which group has the highest average IQ score

For finding the average score we have to find the respective probabilities for each group

For getting the probabilities we divide the frequency by total frequency

IQ score

Investors probability

Non investors  probability

1

0.02

0.041

2

0.3

0.083

3

0.045

0.088

4

0.12

0.174

5

0.19

0.217

6

0.23

0.191

7

0.15

0.099

8

0.115

0.062

9

0.1

0.045

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