For Exercises 3.42 to 3.44, see pages 144145; for 3.45, see page 146; for 3.46 and 3.47, see page 147; for 3.48 and 3.49, see page 150; for 3.50 and 3.51, see page 152; for 3.52, see page 153; for 3.53 and 3.54, see page 154; and for 3.55, see page 156.

Question 3.55

3.55 Does charting help investors?

Some investment advisers believe that charts of past trends in the prices of securities can help predict future prices. Most economists disagree. In an experiment to examine the effects of using charts, business students trade (hypothetically) a foreign currency at computer screens. There are 20 student subjects available, named for convenience A, B, C, … , T. Their goal is to make as much money as possible, and the best performances are rewarded with small prizes. The student traders have the price history of the foreign currency in dollars in their computers. They may or may not also have software that highlights trends. Describe two designs for this experiment—a completely randomized design and a matched pairs design in which each student serves as his or her own control. In both cases, carry out the randomization required by the design.

3.55

In a completely randomized design: 10 students each are randomly assigned to two groups, then one group is randomly assigned the software that highlights trends, the other receives the regular software, and at the end you compare the money made by the two groups. In a matched pairs design: each student uses both types of software in random order for half the time, then the difference between the money made with and without the trend highlights is compared.