Performance of stock screeners. In Exercise 2.44 (p. 71) you learned that stock screeners are automated...

Performance of stock screeners. In Exercise 2.44 (p. 71) you learned that stock screeners are automated tools used by investment companies to help clients select a portfolio of stocks to invest in. The table below lists the annualized percentage return on investment (as compared to the Standard & Poor’s 500 Index) for 13 randomly selected stock screeners provided by the American Association of Individual Investors (AAII).

9.0 -.1 -1.6 14.6 16.0 7.7 19.9 9.8 3.2 24.8 17.6 10.7 9.1

a. Find a 90% confidence interval for the average annualized percentage return on investment of all stock screeners provided by AAII. Interpret the result.

b. Recall that a negative annualized return reflects a stock portfolio that performed worse than the S&P 500. On average, do the AAII stock screeners perform worse or better than the S&P 500? Explain.
c. What assumption about the distribution of the annualized percentage returns on investment is required for the inference, part b, to be valid? Is this assumption
reasonably satisfied?

Expert Solution

From above normal probability plot we see that the normality assumption holds.

milcah answered 1 year ago

how do you determine future performance of the stock price of an S & P company?

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