In the example problem in LOS 11.h in Schweser’s notes, how is the conclusion “betas are lower as a result of deregulation” arrived at? How do we conclude that the betas are lower or have increased? All we know from hypothesis test is that the hypothesis “There is no difference between the betas” is rejected on the basis of stats.
The test statistic is βbefore – βafter. The test statistic falls into the _rejection region to the right _, suggesting that β before deregulation is larger than β after deregulation; i.e., betas have declined. We know more than merely that they’re different; we know the direction in which they’re different.