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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.
Solution
VerifiedTo determine the normality of a given set of data using the Jarque-Bera test, we use the following:
where the skewness is defined by:
and the kurtosis as:
Take note that the represents the sample size, the as the observation values, as the sample mean, while represents the sample standard deviation, which is given by:
The value of that will be obtained will be compared to the significance points found in a statistic table of Jarque-Bera. If our test statistic 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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