Many people believe that there is a “Friday effect” in the stock market. They don’t necessarily spell out exactly what they mean by this, but there is a sense that stock prices tend to be lower on Fridays than on other days. Because stock prices are readily available on the Web, it should be fairly easy to test this (alternative) hypothesis empirically. Before collecting data and running a test, however, you must decide exactly which hypotheses you want to test because there are several possibilities. Formulate at least two sets of null/alternative hypotheses. Then gather some stock price data and test your hypotheses. Can you conclude that there is a statistically significant Friday effect in the stock market?
- Download 1 year of daily data on a stock of your choice (with one restriction: the first letter of the stock’s ticker symbol must match the first letter of your last name)
- Formulate and test at least two sets of null and alternative hypotheses. You must include one based on a mean and another based on a proportion.
- Write a one-page executive summary of your findings/recommendations to a potential client (as if you are financial advisor who was asked by client if “Friday effect” exists for the stock you analyzed).
Notes
- Yahoo Finance is a good source to download historical stock data.
- The Excel WEEKDAY function will likely be helpful.
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