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# Random Walk: Stocks Many economists and financial experts

ISBN: 9780618949922 213

## Solution for problem 8 Chapter 12.4

Understandable Statistics | 9th Edition

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Problem 8

Random Walk: Stocks Many economists and financial experts claim that the price level of a stock or bond is not random, but the price changes tend to follow a random sequence over time. The following data represent annual percentage returns on Vanguard Total Stock Index for a sequence of recent years. This fund represents nearly all publicly traded U.S. stocks. (Reference: Morningstar Mutual Fund Analysis.) 10.4 10.6 0.2 35.8 21.0 31.0 23.3 23.8 10.6 11.0 21.0 12.8 (i) Convert this sequence of numbers to a sequence of symbols A and B, where A indicates a value above the median and B a value below the median. (ii) Test the sequence for randomness about the median. Use a 0.05. 8.

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