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HKU STAT1600 Assignment 4 Solution

HKU STAT1600 Assignment 4 Solution

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STAT1600A Statistics: Ideas and Concepts

2016-2017 First Semester

Core course for Risk Management Major and Statistics Major (4-year curriculum):

Assignment 4

Assessment Criteria

In order to fight against plagiarism, assessment would also be based on your participation, not

only accuracy.

When you encounter any difficulty, write down your obstacles in your work and show how you

can/cannot tackle them. If it is reasonable, and you have shown your effort in attempting the

question, you may still score partial marks despite of the incompleteness.

Another important consideration is the way you present your work. The logical flows, organi-

zational skills and presentation methods will also count.

You are allowed to discuss your work with your friends, but you cannot directly copy the work

of your classmates, even with their consent.

Assignment Questions

This assignment has a total of 100 points. Answer ALL FOUR questions.

1. (40 marks)

Eric is applying for a job at Google. From the past, he observes that acceptance letters and

rejection letters were received in the following pattern (e.g., probability of receiving mail on

Monday is 0.16 given that the mail is an acceptance letter):

Monday 0.16 0.15

Tuesday 0.21 0.13

Wednesday 0.24 0.19

Thursday 0.18 0.21

Friday 0.11 0.25

Assignment 4 Department of Statistics & Actuarial Science

The University of Hong Kong

The University of Hong Kong

Department of Statistics & Actuarial Science

STAT1600A Statistics: Ideas and Concepts

2016-2017 First Semester

Assume that P(acceptance) = 0.4 for all applicants. Calculate the following probabilities:

ans:P (M on) = P (M on|acc) P (acc) + P (M on|rej) P (rej) = 0.16 0.4 + 0.15

(1 0.4) = 0.154

(b) Eric receives mail on Tuesday given that he does not receive mail on Monday.

ans:

P (T ueM onC ) P (T ue)

P T ue|M onC = P (M onC )

= 1P (M on)

P (T ue) = P (T ue|acc) P (acc) + P (T ue|rej) P (rej) = 0.21 0.4 + 0.13 (1 0.4) =

0.162

Therefore:

P (T ue) 0.162

P T ue|M onC = 1P (M on)

= 10.154

= 0.191

(c) Eric is accepted by Google given that there is no mail from Monday to Wednesday.

ans:

Let T = no mail from Mon to Wed.

P (accT ) P (T |acc)P (acc)

P (acc|T ) = P (T )

= P (T |acc)P (acc)+P (T |rej)P (rej)

Now,

P (T |acc) = 1 P (M on T ue W ed|acc) = 1 (0.16 + 0.21 + 0.24) = 0.39

P (T |rej) = 1 P (M on T ue W ed|rej) = 1 (0.15 + 0.13 + 0.19) = 0.53

Therefore

0.390.4

P (acc|T ) = 0.390.4+0.530.6

= 0.329

(d) Eric is accepted by Google given that the mail comes on Thursday.

ans:

P (accT hu) P (T hu|acc)P (acc)

P (acc|T hu) = P (T hu)

= P (T hu|acc)P (acc)+P (T hu|rej)P (rej)

Therefore

0.180.4

P (acc|T hu) = 0.180.4+0.210.6

= 0.364

Assignment 4 Department of Statistics & Actuarial Science

The University of Hong Kong

The University of Hong Kong

Department of Statistics & Actuarial Science

STAT1600A Statistics: Ideas and Concepts

2016-2017 First Semester

(e) Eric is accepted by Google given that the no mail comes through out the whole week.

ans:

Let N = no mail whole week

P (accN ) P (N |acc)P (acc)

P (acc|N ) = P (N )

= P (N |acc)P (acc)+P (N |rej)P (rej)

Now,

P (N |acc) = 1P (M on T ue W ed T hu F ri|acc) = 1(0.16 + 0.21 + 0.24 + 0.18 + 0.11) =

0.1

P (T |rej) = 1P (M on T ue W ed T hu F ri|rej) = 1(0.15 + 0.13 + 0.19 + 0.21 + 0.25) =

0.07

Therefore

0.10.4

P (acc|N ) = 0.10.4+0.070.6

= 0.488

Assignment 4 Department of Statistics & Actuarial Science

The University of Hong Kong

The University of Hong Kong

Department of Statistics & Actuarial Science

STAT1600A Statistics: Ideas and Concepts

2016-2017 First Semester

2. (25 marks)

Suppose we take a random sample of 1234 stock market trading days and find that 650 days

are up days.

(a) Calculate the sample proportion of updays for this random sample.

ans: p = 1234

650

= 0.5267

(b) Now, we wish to test the null hypothesis that any given trading day can be up or down

with equal chance, against the alternative that there are more up days than down

days. Write down the Null and Alternative Hypotheses using the notation p = population

proportion of updays.

ans: H0 : p = 0.5.

H1 : p > 0.5.

(c) Calculate a test statistic based on your answer in part (b).

ans: z = q ppp(1p0 ) = q0.52670.5 = 1.8788

0 0 0.5(10.5)

p0 0.5

(d) We calculated that the p-value of the test statistic in part (c) is 0.0301. How would you

draw your conclusion if the level of significance is set at 5%?

ans: Since 0.0301 < 5%, reject H0: p = 0.5.

(e) Now, we repeat part (b) except that the alternative hypothesis is changed to the following:

the number of up days and number of down days are different. Again write down the

Null and Alternative Hypotheses using the notation p = population proportion ofupdays.

ans: H0 : p = 0.5.

H1 : p6=0.5.

(f) Calculate the p-value of the test statistic in part (c) based on your answer in part (e).

ans: p value = 0.0301 2 = 0.0602

(g) Now, how would you draw your conclusion if the level of significance is again set at 5%?

ans: Since 0.0602 > 5%, cannot reject H0: p = 0.5.

3. (10 points)

(i) Eric will discover a lucrative trading strategy on the stock market and become a

billionaire next year.

(ii) Eric will become a billionaire next year.

(b) Very few good computer programmers are female. Therefore, many tech companies ignore

female applicants when hiring top programmers.

Whats wrong with this statement?

Assignment 4 Department of Statistics & Actuarial Science

The University of Hong Kong

The University of Hong Kong

Department of Statistics & Actuarial Science

STAT1600A Statistics: Ideas and Concepts

2016-2017 First Semester

(a) ans: The event that Eric will discover a lucrative trading strategy on the stock market

and become a billionaire next year. is a subset of the event Eric will become a billionaire

next year. Therefore, event (ii) has a higher chance of happening.

(b) ans: This statement is sufferring from the confusion of inverse. The proportion of girls

among top programmers is not the same as the proportion of top programmers among

girls. Information about the base rate of good programmers is needed in order to draw a

conclusion.

4. (25 marks)

Eric and Gabrielle have different trading strategies when it comes to trading on the stock

market. We randomly take a sample of 50 trading days from Erics trading activity and

independently take another random sample of 60 trading days from Gabrielles trading activity.

The daily profits that they made from these sampled trading days are contained in an Excel

file called Trading.xlsx. This file can be found in moodle next to this assignment.

(a) Calculate the sample mean and sample standard deviation of daily profits for Eric. Do

the same for Gabrielle.

ans:

sample mean for Eric = 3.8

sample sd for Eric = 60.8015

sample mean for Gabrielle = 59.6167

sample sd for Gabrielle = 92.4220

(b) Calculate the difference in sample mean daily profits between Eric and Gabrielle, i.e.,

calculate Erics sample mean - Gabrielles sample mean.

ans: Erics sample mean - Gabrielles sample mean = -55.8167

(c) Now, calculate the standard error of the diference in two means you calculated in part

(b).

q

ans: Eric0 s sample sd2

50

+ Gabrielle0 s sample sd2

60

= 14.7072

(d) Hence, calculate a 95% confidence interval for the diference in two means.

ans: -55.8167214.7072=(85.2310, 26.4024)

(e) Based on your answer in part (d), what conclusion can you draw regarding whose strategy

is superior? Erics strategy or Gabrielles strategy? Explain.

ans: Since the entire confidence interval lies below zero,

we are fairly confident (95%) that Gabrielles strategy

is more superior than Erics strategy.

End of Assignment 4

Assignment 4 Department of Statistics & Actuarial Science

The University of Hong Kong

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