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Select a stock such as Apple, Dell, or Microsoft and use the Jarque-Bera test to determine if the annual daily rates of return for a particular year follow a normal distribution.

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To determine the normality of a given set of data using the Jarque-Bera test, we use the following:

JB=n[(skewness)26+(kurtosis3)224],\begin{equation} JB=n\left[ \dfrac{\text{(skewness)}^2}{6}+\dfrac{\text{(kurtosis}-3)^2}{24} \right], \end{equation}

where the skewness is defined by:

skewness=i=1n(xixˉ)3ns3,\begin{equation} \text{skewness}=\dfrac{\sum_{i=1}^n(x_i-\bar x)^3}{ns^3}, \end{equation}

and the kurtosis as:

kurtosis=i=1n(xixˉ)4ns4.\begin{equation} \text{kurtosis}=\dfrac{\sum_{i=1}^n(x_i-\bar x)^4}{ns^4}. \end{equation}

Take note that the nn represents the sample size, the xx as the observation values, xˉ\bar x as the sample mean, while ss represents the sample standard deviation, which is given by:

s=1n1i=1n(xixˉ)2.\begin{equation} s=\sqrt{\dfrac{1}{n-1}\sum^n_{i=1}(x_i-\bar x)^2}. \end{equation}

The value of JBJB that will be obtained will be compared to the significance points found in a statistic table of Jarque-Bera. If our test statistic JBJB exceeds the appropriate values, we reject the null hypothesis of normality, which is the assumption that the given data exhibits a normal distribution.

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