CFA CFA Level 1 Test of Independence using Contingency data table

Test of Independence using Contingency data table

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• metwoboy
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• CFA Level 1
2

Hi,

I have a question on this Exhibit 30 example. I am not sure why this is a one-tailed test.

Given Hypothesis set up is H0: R = 0 ; Ha: R != 0

If the null hypothesis is rejected, then the Alt Hypothesis can be positively correlated and negative correlated. Isn’t this is indicating a two- tailedÂ  test?

Thanks
 Step 1 State the hypotheses. H0: ETF size and investment type are not related, so these classifications are independent; HaÂ : ETF size and investment type are related, so these classifications are not independent. Step 2 Identify the appropriate test statistic. Ï‡2=âˆ‘i=1m(Oijâˆ’Eij)2Eij${\mathrm{Ï‡}}^{2}=\underset{i=1}{\overset{m}{âˆ‘}}\frac{{}^{\left(}}{}2{E}_{ij}$ Step 3 Specify the level of significance. 5% Step 4 State the decision rule. With (3 âˆ’ 1) Ã— (3 âˆ’ 1) = 4 degrees of freedom and a one-sided test with a 5% level of significance, the critical value is 9.4877.