Critical Value Chi-Square

[SamuelMartin]

Question:

My questions is: How do I come up with: value of chi-square will be 79.08 (using df=60 and p=0.05)? Should GARP provide a table for me to look at those values?

Thanks

Using a sample size of 61 observations, an analyst determines that thestandard deviation of the returns from a stock is. 21%. Using a 0.05 significance level, the analyst:

A. Can conlude that the standard deviation of returns is higher than 14%

B. Cannot conlude that the standard deviation of returns is higher than 14%

C. Can conlude that the standard deviation of returns is not higher than 14%

D. None of the above


Answer A:

Tes statistics = (n-1) sample variance / hypothesized vaciance = 60 x 21%2 / 14%2 = 135

To test whether the standar diviation is higher the critical value of chi-square will be 79.08 (using df=60 and p=0.05)

 

[David Harper CFA FRM]

Hi @SamuelMartin yes, if you need it, the question (or question book) will definitely provide the lookup table (for example, GARP's 2014 Practice Exam contains an up-front page with an entire Z cumulative CDF lookup table).

Among the four sampling distributions (normal, student's t, chi^2, and F), I will say the chi^2 and F are less, if not much less, testable quantitatively than the Z/t. If they were needed, they would invariably be values/fragments provided in (inline) the question. I do think it's worth knowing this questions's concept: that the chi^2 is used to test a sample variance. I hope that helps!