F statistic comparing two bolt variances
Question
Twelve bolts from one manufacturer have a sample variance in diameter of ; twelve bolts from a rival have a sample variance of . You want to know whether the rival's bolts vary less. Assuming independent samples and normally distributed diameters, what is the value of the appropriate test statistic?
Short answer
. Comparing two normal variances uses the F-test, with the larger sample variance on top: , referred to an distribution.
Adapted from OpenQuant; question and answer rewritten by SelfMadeQuant.com.
See the hint and the full worked solution in the question bank (free account).
Open the worked solutionLessons behind this question
Start with a free lesson: Expectation, Variance and Covariance is part of a free topic. Create a free account, no card needed, to read it in full with worked solutions.
Read it free