- Investors often believe the stock market should move in tandem with the economy as a whole (i.e., higher economic growth is associated with higher investment returns). Set up an experiment to test this concept. For your data, use quarterly real GDP growth and quarterly S&P 500 return. Use the step by step approach discussed in this course. Hint: Linear regression will get you the answer you need. Just be sure to set the question up correctly.
- On average, does the S&P return outpace the GDP growth rate? Use the same data as question 1 and the step by step approach to testing this idea. Testing a hypothesis about two means is what is needed here.
- On average, is the S&P return more volatile than the GDP growth rate? Use the same data and same step by step process. Testing a hypothesis about two variances is the hint for this one. Donâ€™t forget to use the right test statistic
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