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Basic Statistics for Business and Economics | 7th Edition | ISBN: 9780077384470 | Authors: Douglas Lind; William Marchal; Samuel Wathen
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According to the “January theory,” if the stock market is

Chapter 6, Problem 56E

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QUESTION:

Problem 56E

According to the “January theory,” if the stock market is up for the month of January, it will be up for the year. If it is down in January, it will be down for the year. According to an article in The Wall Street Journal, this theory held for 29 out of the last 34 years. Suppose there is no truth to this theory; that is, the probability it is either up or down is .50. What is the probability this could occur by chance? You will probably need a software package such as Excel or MINITAB.

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QUESTION:

Problem 56E

According to the “January theory,” if the stock market is up for the month of January, it will be up for the year. If it is down in January, it will be down for the year. According to an article in The Wall Street Journal, this theory held for 29 out of the last 34 years. Suppose there is no truth to this theory; that is, the probability it is either up or down is .50. What is the probability this could occur by chance? You will probably need a software package such as Excel or MINITAB.

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We will use the Formula for Poisson probability in this problem.

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