Example of one sample t-test
A share tipping service claims that its selections give an
average return of 10% if held for 12 months. An investor wants to investigate
this claim and records the returns of the last 20 shares that have met the 12
month period. The sample mean return is 9% and the standard deviation is 2.5%.
You can assume that the return from the shares that the company tips has a
normal distribution.
i) Construct a suitable hypothesis test for this
investigation.
ii) Test whether you would reject the null hypothesis at the
0.05 significance
level and comment on your result.
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