Hello everyone,
I have some trouble understanding the solution to this exercide (provided by investopedia.com):
A sample of 50 stocks is drawn from a particular market in order to estimate its dividend yield. If the average dividend yield of the sample is 7.2% and its variance is 11.56%, what will be the estimated standard error of the probability distribution of the sample mean? (a) 0.23 (b) 0.48 © 0.47 The solution is b), we simply divide the variance (11.56) by the number of observations (50) and then take the square root of that result. Now, my question is this: given that the variance is provided in percent, I could have also divided (0.1156) through 50 and then take the square root, which yields 0.048. Typically, whenever you do this with other non-variance questions, you just have to multiply by 100 again to get the correct result. But here this does not work. Do I need to instead multiply by sqrt(100), since we are dealing with the variance here. I do vaguely remember some related rule from statistics, but google could not help me on this one (or I searched for the wrong terms). Can anyone help? Thanks Niccola