Question

1. Using R, construct time series (line) plots for both stock prices and return series. R functions ts.plot or plot can create the plot. Describe the patterns and compare the plots.

2. Based on the return series, can we claim that the mean Amazon return series is higher than that of Google?

a. What would be an appropriate test of the claim above? Explain.
b. Write the null and alternative hypotheses.
c. Using R, perform the test.
d. Write the decision in the problem context.

Take the screenshots of the R graphs and output as well as the code.

The file needed for this assignment can be found here: drive.google.com/file/d/1-JQz8vy61IJF_d2Qr3g4gvbDxIZODQji/view?usp=sharing

Answer 1

We can use a t-test to find whether the Amazon returns are higher than Google returns

Let X denotes the difference in Amazon stock and Google stock return

E(X)=mu

Since the p-value is less than 0.05, at 5% level of significance we can conclude that amazon stock returns are higher than google stock returns