91Ó°ÊÓ

A survey of 131 investment managers revealed the following: \(\cdot\) \(43 \%\) of managers classified themselves as bullish or very bullish on the stock market. \(\cdot\) The average expected return over the next 12 months for equities was \(11.2 \%\) \(\cdot\) \(21 \%\) selected health care as the sector most likely to lead the market in the next 12 months. \(\cdot\) When asked to estimate how long it would take for technology and telecom stocks to resume sustainable growth, the managers' average response was 2.5 years. a. Cite two descriptive statistics. b. Make an inference about the population of all investment managers concerning the average return expected on equities over the next 12 months. c. Make an inference about the length of time it will take for technology and telecom stocks to resume sustainable growth.

Step by step solution

01

Identifying Descriptive Statistics

Descriptive statistics include any statistic that describes or summarizes data. From the survey, two descriptive statistics are: 1) 43% of investment managers classified themselves as bullish or very bullish on the stock market; 2) 21% of investment managers selected health care as the sector most likely to lead the market in the next 12 months.

02

Making an Inference on Equities Return

The average expected return over the next 12 months for equities is given as 11.2%. This average reflects the collective estimation of the 131 investment managers surveyed. We can use this to infer that the population of all investment managers might also, on average, expect a similar percentage return on equities over the next year.

03

Making an Inference on Technology and Telecom Growth

From the survey, the managers estimated that it would take, on average, 2.5 years for sustainable growth to return to technology and telecom stocks. This suggests that the broader population of investment managers might also expect a similar timeframe for recovery in these sectors. It's based on the assumption that the surveyed managers are representative of the entire population.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Inferential Statistics

Inferential statistics help us use a sample to make generalizations about a larger population. In this exercise, after surveying 131 investment managers, we use their responses to draw conclusions about all investment managers.
By examining the average expected return of 11.2% for equities, we infer that this could also represent the expectation of the entire population of investment managers.

• Key idea: We use sample data (131 managers) to estimate values for the entire group (all managers).
• Reliability: The validity of our inference depends on how representative the sample is of the population.

When making such inferences, it's crucial to consider the sample’s size and diversity, as these factors can impact the accuracy of the conclusions drawn.
Therefore, inferential statistics allow us to make educated guesses even when we can't survey everyone in the population. They are especially useful in market research and forecasting.

Survey Sampling

Survey sampling is a technique used to select a portion of individuals from a larger population. This exercise utilizes survey sampling by gathering insights from 131 investment managers.

• Representativeness: A good sample accurately reflects the characteristics of the entire population.
• Size: A larger sample tends to provide more reliable information, though practical limitations often constrain the sample size.

By surveying a sample of managers, researchers aim to understand broader trends without the need for data from every investment manager. It helps save time and resources.
However, it's crucial for the sample to be chosen randomly to avoid bias, ensuring that each member of the larger population has an equal chance of being selected. Proper sampling enhances the reliability of inferences drawn in statistics.

Expected Return

Expected return is the anticipated profit from an investment. In this context, the average expected return over the next 12 months for equities, reported as 11.2% by the survey, provides investors with a benchmark.

• Definition: It helps predict possible future gains based on historical or survey data.
• Use: Investment managers use expected return to guide decisions about where to allocate funds.

Understanding the expected return is critical for making informed decisions regarding investments. It reflects the judgment of the managers surveyed about future market conditions.
By considering expected returns, investors can evaluate the potential attractiveness of different investments, balancing risk and reward. This concept is central to portfolio management and personal finance decisions.