Concept explainers
Buy-side vs. sell-side analysts’ earnings forecasts. Refer to the Financial Analysts Journal (July/August 2008) study of earnings forecasts of buy-side and sell-side analysts, Exercise 2.86 (p. 88). Recall that data were collected on 3,526 forecasts made by buy-side analysts and 58,562 forecasts made by sell-side analysts, and the relative absolute forecast error was determined for each. A positive forecast error indicates that the analyst is overestimating earnings, while a negative forecast error implies that the analyst is underestimating earnings. Summary statistics for the forecast errors in the two samples are reproduced in the table below.
Buy-Side Analysts | Self-side Analysts | |
0.85 | −0.05 | |
Standard Deviation | 1.93 | 0.85 |
- a. Conduct a test (at α = .01) to determine if the true mean forecast error for buy-side analysts is positive. Use the observed significance level (p-value) of the test to make your decision and state your conclusion in the words of the problem.
- b. Conduct a test (at α =. 01) to determine if the true mean forecast error for sell-side analysis is negative. Use the observed significance level (p-value) of the test to make your decision and state your conclusion in the words of the problem.
Want to see the full answer?
Check out a sample textbook solutionChapter 7 Solutions
STATISTICS F/BUS.+ECON.-18WK. MYSTATLAB
Additional Math Textbook Solutions
The Practice of Statistics for AP - 4th Edition
Essentials of Statistics, Books a la Carte Edition (5th Edition)
Fundamentals of Statistics (5th Edition)
Probability and Statistics for Engineering and the Sciences
Statistics for Engineers and Scientists
Statistics Through Applications
- To combat antibiatic resistance, the Quality Consortium recommends a throat swab to confirm strep throat before a physician prescribes antibiotics to children under age 5. Nationally, 40 percent of children under 5 who received antibiotics did not have a throat swab. The Colorado Department of health took a random sample of 88children under the age of 5who received antibiotics for throat infections and found that 30 did not have a throat swab. At a=.05, is this a statistically significant reduction over last years national rate of 40 percent?What is the test statistic?arrow_forwardIn an article in Accounting and Business Research, Beattie and Jones investigate the use and abuse of graphic presentations in the annual reports of United Kingdom firms. The authors found that 65 percent of the sampled companies graph at least one key financial variable, but that 30 percent of the graphics are materially distorted (nonzero vertical axis, exaggerated trend, or the like). Results for U.S. firms have been found to be similar. (a) Suppose that in a random sample of 466 graphics from the annual reports of United Kingdom firms, 142 of the graphics are found to be distorted. Find a point estimate of and a 95 percent confidence interval for the proportion of all U.K. annual report graphics that are distorted. (Round your answers to 4 decimal places.)arrow_forwardA Bloomberg Businessweek North American subscriber study collected data from asample of 2861 subscribers. Fifty-nine percent of the respondents indicated an annualincome of $75,000 or more, and 50% reported having an American Express credit card.a. What is the population of interest in this study?b. Is annual income a categorical or quantitative variable?arrow_forward
- which of the following individuals is likely to be excluded from a clinical trial? a-individual with other diseases besides the disease of interest b-an individual whose data is considered to be an outlier c-an individual of who is considered to be a minority d-an individual who will have difficulty complying trial protocols.arrow_forwardIn a 1993 article in Accounting and Business Research, Meier, Alam, and Pearson studied auditor lobbying on several proposed U.S. accounting standards that affect banks and savings and loan associations. As part of this study, the authors investigated auditors’ positions regarding proposed changes in accounting standards that would increase client firms’ reported earnings. It was hypothesized that auditors would favor such proposed changes because their clients’ managers would receive higher compensation (salary, bonuses, and so on) when client earnings were reported to be higher. Table (below) summarizes auditor and client positions (in favor or opposed) regarding proposed changes in accounting standards that would increase client firms’ reported earnings. Here the auditor and client positions are cross-classified versus the size of the client firm. (a) Auditor Positions LargeFirms SmallFirms Total In Favor 18 125 143 Opposed 20 14 34 Total 38 139 177 (b) Client…arrow_forwardIn a 1993 article in Accounting and Business Research, Meier, Alam, and Pearson studied auditor lobbying on several proposed U.S. accounting standards that affect banks and savings and loan associations. As part of this study, the authors investigated auditors’ positions regarding proposed changes in accounting standards that would increase client firms’ reported earnings. It was hypothesized that auditors would favor such proposed changes because their clients' managers would receive higher compensation (salary, bonuses, and so on) when client earnings were reported to be higher. Table (below) summarizes auditor positions regarding proposed changes in accounting standards that would decrease client firms’ reported earnings. LargeFirms SmallFirms Total In Favor 27 152 179 Opposed 29 154 183 Total 56 306 362 Click here for the Excel Data File Determine whether the…arrow_forward
- In a 1993 article in Accounting and Business Research, Meier, Alam, and Pearson studied auditor lobbying on several proposed U.S. accounting standards that affect banks and savings and loan associations. As part of this study, the authors investigated auditors’ positions regarding proposed changes in accounting standards that would increase client firms’ reported earnings. It was hypothesized that auditors would favor such proposed changes because their clients’ managers would receive higher compensation (salary, bonuses, and so on) when client earnings were reported to be higher. Table (below) summarizes auditor and client positions (in favor or opposed) regarding proposed changes in accounting standards that would increase client firms’ reported earnings. Here the auditor and client positions are cross-classified versus the size of the client firm. LargeFirms SmallFirms Total In Favor 13 130 143 Opposed 10 24 34 Total 23 154 177 LargeFirms SmallFirms Total…arrow_forwardThe article “Well-Fed Crickets Bowl Maidens Over” (Nature Science Update, February 11, 1999) reported that female field crickets are attracted to males with high chirp rates and hypothesized that chirp rate is related to nutritional status. The usual chirp rate for male field crickets was reported to vary around a mean of 60 chirps per second. To investigate whether the chirp rate was related to nutritional status, investigators fed 26 male crickets a high protein diet for 8 days, after which chirp rate was measured. Let: The parameter μ be the mean chirp rateof male crickets on a high protein diet for 8 days. Given: The mean chirp rate for the random sample of crickets on the high protein diet was reported to be 64.04 chirps per second with a standard deviation of 10. Research Question: Is there convincing evidence that the mean chirp rate for crickets on a high protein diet implies an advantage in attracting the ladies? It is known that the researchers did not want to…arrow_forwardThe article “Well-Fed Crickets Bowl Maidens Over” (Nature Science Update, February 11, 1999) reported that female field crickets are attracted to males with high chirp rates and hypothesized that chirp rate is related to nutritional status. The usual chirp rate for male field crickets was reported to vary around a mean of 60 chirps per second. To investigate whether the chirp rate was related to nutritional status, investigators fed 22 male crickets a high protein diet for 8 days, after which chirp rate was measured. Let: The parameter μμ be the mean chirp rateof male crickets on a high protein diet for 8 days. Given: The mean chirp rate for the random sample of crickets on the high protein diet was reported to be 65.32 chirps per second with a standard deviation of 12. Research Question: Is there convincing evidence that the mean chirp rate for crickets on a high protein diet implies an advantage in attracting the ladies? It is known that the researchers did not want to…arrow_forward
- The article “Well-Fed Crickets Bowl Maidens Over” (Nature Science Update, February 11, 1999) reported that female field crickets are attracted to males with high chirp rates and hypothesized that chirp rate is related to nutritional status. The usual chirp rate for male field crickets was reported to vary around a mean of 60 chirps per second. To investigate whether the chirp rate was related to nutritional status, investigators fed 22 male crickets a high protein diet for 8 days, after which chirp rate was measured. Let: The parameter μμ be the mean chirp rateof male crickets on a high protein diet for 8 days. Given: The mean chirp rate for the random sample of crickets on the high protein diet was reported to be 65.32 chirps per second with a standard deviation of 12. Research Question: Is there convincing evidence that the mean chirp rate for crickets on a high protein diet implies an advantage in attracting the ladies? It is known that the researchers did not want to…arrow_forwardThe article “Well-Fed Crickets Bowl Maidens Over” (Nature Science Update, February 11, 1999) reported that female field crickets are attracted to males with high chirp rates and hypothesized that chirp rate is related to nutritional status. The usual chirp rate for male field crickets was reported to vary around a mean of 60 chirps per second. To investigate whether the chirp rate was related to nutritional status, investigators fed 27 male crickets a high protein diet for 8 days, after which chirp rate was measured. Let: The parameter μ be the mean chirp rateof male crickets on a high protein diet for 8 days. Given: The mean chirp rate for the random sample of crickets on the high protein diet was reported to be 64 chirps per second with a standard deviation of 14. Research Question: Is there convincing evidence that the mean chirp rate for crickets on a high protein diet implies an advantage in attracting the ladies? It is known that the researchers did not want to risk a…arrow_forwardMedical research has shown that repeated wrist extensions beyond 20 degrees increase the risk of wrist and hand injuries. Each of 24 students at Cornell University used a proposed new computer mouse design, and while using the mouse, each student’s wrist extension was recorded. Data consistent with summary values given in the paper “Comparative Study of Two Computer Mouse Designs” (Cornell Human Factors Laboratory Technical Report RP7992) are given here. 27 28 24 26 27 25 25 24 24 22 25 24 28 27 26 31 25 28 25 28 27 25 a. Use these data to estimate the mean wrist extension for people using this new mouse design using a 90% confidence interval.b. What assumptions are required in order for it to be appropriate to generalize your estimate to the population of Cornell students? To the population of all university students?c. Based on your interval from Part (a), do you think there is reason to believe that the mean wrist extension for people using the new mousedesign is…arrow_forward
- Big Ideas Math A Bridge To Success Algebra 1: Stu...AlgebraISBN:9781680331141Author:HOUGHTON MIFFLIN HARCOURTPublisher:Houghton Mifflin HarcourtGlencoe Algebra 1, Student Edition, 9780079039897...AlgebraISBN:9780079039897Author:CarterPublisher:McGraw Hill