Exercise Solution 5.1

Exercise Solution 5.1

  1. Many empirical tests might be considered. Let’s consider the following five:
    • sample mean,
    • sample standard deviation,
    • sample autocorrelation (lag 1),
    • sample autocorrelation (lag 2),
    • sample autocorrelation (lag 3).
  2. Results obtained using a spreadsheet are indicated below (results in parenthesis indicate what would be expected for pseudorandom numbers).
    • sample mean: .496 (.500),
    • sample standard deviation: .285 (.289),
    • sample autocorrelation (lag 1): .019 (.000),
    • sample autocorrelation (lag 2): .552 (.000),
    • sample autocorrelation (lag 3): .100 (.000).
  3. While 40 is a very small sample size, we still may consider the numbers not pseudorandom based upon the large sample autocorrelation for lag 2.

 
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