From Kaplan:
I tried calculating the t-stat with 1.1/0.4 = 2.75.
Why did they subtract the estimated Beta from the Null hypthothesis’ Beta in the numerator?
I tried calculating the t-stat with 1.1/0.4 = 2.75.
For a z-test (or a t-test), the test statistic is always:
z\ (or\ t) = \frac{\bar X - \mu_0}{s/\sqrt{n}}
You’re interested in whether the sample mean is close to the hypothesized value or not.
Ask yourself this: would you use the same test statistic (\frac{1.1}{0.4}) to determine whether the reject the null hypothesis \mu_0 = 1.0 and to reject the null hypothesis \mu_0 = 1,000,000?
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Of course! That is Level 1 material, arghh. Thank you.
Yup.