CompTIA Data+ (DA0-002)Data AnalysisEasy
A financial analyst is comparing the returns of two different investment portfolios, Portfolio A and Portfolio B, over the last five years. They want to determine if there is a statistically significant difference in the average returns between these two independent portfolios. The analyst has reason to believe that the returns data for both portfolios are normally distributed. Which statistical test should the analyst apply?
- APaired t-test
- BANOVA
- CIndependent samples t-test
- DWilcoxon signed-rank test
Show answer & explanationAnswer & explanation
Correct answer: C. Independent samples t-test
The independent samples t-test is used to compare the means of two independent groups to determine if there is a statistically significant difference between them, assuming the data is normally distributed. In this scenario, Portfolio A and Portfolio B are independent groups, and their returns are assumed to be normally distributed.
Why the other options are wrong
- A. A paired t-test is used for dependent (matched) samples, not independent portfolios.
- B. ANOVA is used for comparing means of three or more groups, not just two.
- D. The Wilcoxon signed-rank test is a non-parametric test for dependent samples, not independent normally distributed data.
Independent Samples t-test
A parametric statistical hypothesis test used to determine if there is a significant difference between the means of two independent groups.
- Assumes data is normally distributed.
- Compares the means of two distinct, unrelated groups.
- Requires interval or ratio level data.
Memory trick: Independent Samples t-test: Like two separate teams, you check if their average scores are truly different.