Hi everyone,

I need help with Reading 11, p. 649, Question 10. I would like to know why was it “reasonable to assume” that the population variance is equal? Standard dev clearly is different from Analyst A (0.10) to Analyst B (0.09). I don’t believe this was due to a 1-basis point difference. Thank you.

What I see is that the samples are very similar in size, they are big samples and the standard deviations are very similar too. If we run a F-test of equality of variances of the two analysts’s forecasts we should have the following:

H0 : s^2(A) = S^2(B) , HA : S^2(A) different than S^2(B)

F = S^2(A) / S^2(B) = 0.1^2 / 0.09^2 = 1.23

F-table (critic) is aprox 1.38 for samples of 100 and 120 respectively. So we **cannot reject the null hypothesis** of both variances are equal. Of course this is for the sample, but since those samples could be practically the population because “how many forecasts more than 100 or 120 those analyst could have made?” I think those samples are populations. So, from the results of our F test we can conclude both variances are statistically equal.

I think the book said “reasonable” because they didn’t want to show the part I have explained above.