Calculating the t-statistic for Hypothesis Testing on Correlation
The Spearman’s rank correlation coefficient is a non-parametric statistical test used to examine whether there is a significant relationship between two sets of data. Like the correlation coefficient, Spearman’s rank correlation can have any value between –1 and +1. A…
Hypothesis Test Concerning the Equality of the Population Means
Analysts are often interested in establishing whether there exists a significant difference between the means of two different populations. For instance, they might want to know whether the average returns for two subsidiaries of a given company exhibit a significant…
Significance of a Test in the Context of Multiple Tests
Type I error occurs when we reject a true null hypothesis. Type I error is also referred to as a false positive result because the null is true, but it is rejected (the false positive). The expected part of a…
Decision Rules in Hypothesis Tests
The decision rule refers to the procedure followed by analysts and researchers when determining whether to reject or not to reject a null hypothesis. We use the phrase “not to reject” because it is considered statistically incorrect to “accept” a…
Test Statistic, Type I and Type II Errors, Power of a Test, and Significance Levels
A test statistic is a standardized value computed from sample information when testing hypotheses. It compares the given data with what an analyst would expect under a null hypothesis. As such, it is a major determinant of the decision to…
Compare Methods by which Companies can be Grouped
Products and/or Services Supplied The most widely used industry classification method is the grouping of companies offering similar products and/or services. A company’s classification is usually based on its principal business activity or the source from which the company derives…
Interaction between Monetary and Fiscal Policies
Both monetary policy and fiscal policy can be utilized to influence the economy. These measures do not compete against each other. Instead, they complement each other. However, the impact of the two policies may vary or even cancel out each…
Expansionary and Contractionary Fiscal Policies
Fiscal policies are carried out by the legislative and sometimes, the executive branch of the government. The two main instruments of fiscal policy are taxes and government expenditure. The government amasses taxes to finance its expenditures. Therefore, fiscal policy can…
Implementing of Fiscal Policy
Fiscal policy refers to all the methods used by a government to influence the economy through tax rates and government expenditures. For example, a government may decide to reduce taxes. These moves should, in theory, stimulate the economy and thereby,…
Size of a National Debt Relative to GDP
The national debt is the total amount of money owed by the central government. It is important for a country to grow its economy and, at the same time, reduce its national debt. Many believe that government debt can cause…
