Statistics Test Mutual Funds
Question
Fidelity Magellan is a large cap
growth mutual fund and Fidelity Small Cap Stock is a small cap growth mutual
fund (Morningstar Funds 500, 2006). The standard deviation for both funds was
computed based on a sample size of 26. For Fidelity Magellan, the sample
standard deviation is 8.89%; for Fidelity Small Cap Stock, the sample standard
deviation is 13.03%. Financial analysts often use the standard deviation as a
measure of risk. Conduct a hypothesis test to determine whether the small cap
growth fund is riskier than the large cap growth fund. Use an alpha of 0.05 as
the level of significance.
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