A t-Test is used to compare the difference in means between two samples is undertaken when sample size less than 30

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Statistical Tests Comparing Difference in Means (Average Values) A t-Test is used to compare the difference in means (average returns) between two samples is undertaken when sample size less than 30

For large samples, such as financial stock returns or exchange rates, we use Z-Test Statistic

We assume a normal distribution for sample size n > 30 and so we use p-value to test the difference in means for large samples ================================================================== For large samples n > 30 we use Z-Test Statistic => Z-value , where:

( 12 1 2 ) ( ) 2 2 1 2 1 2 x x Z s s n n −−− µ µ = +

Choose an α level of significance say 0.05 which implies (1- α ) or 95% Confidence Interval Hypothesis Testing: Null Hypothesis Ho: µ = µ0

(Assume the two samples have same average stock returns or exchange rates) Alternate Hypothesis Ha: µ ≠ µ0

(Assume the two samples do not have same average stock returns or exchange rates)

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