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Cheng-Few Lee John C. Lee Alice C. Lee Statistics for Business and Financial Economics Third Edition Statistics for Business and Financial Economics Cheng-Few Lee (cid:129) John C. Lee (cid:129) Alice C. Lee* Statistics for Business and Financial Economics Third Edition *Disclaimer:Anyviewsoropinionspresentedinthispublicationaresolelythoseoftheauthors anddonotnecessarilyrepresentthoseofStateStreetCorporation.StateStreetCorporationisnot associated in any way with this publication and accepts no liability for the contents of this publication. Cheng-FewLee JohnC.Lee DepartmentofFinanceandEconomics CenterforPBBEFResearch RutgersUniversityBusinessSchool Morrisplains,NewJersey Piscataway,NewJersey USA USA AliceC.Lee StateStreetCorporation Boston,Massachusetts USA ISBN978-1-4614-5896-8 ISBN978-1-4614-5897-5(eBook) DOI10.1007/978-1-4614-5897-5 SpringerNewYorkHeidelbergDordrechtLondon LibraryofCongressControlNumber:2012951347 #SpringerScience+BusinessMediaNewYork2013 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpart of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation,broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionor informationstorageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilar methodologynowknownorhereafterdeveloped.Exemptedfromthislegalreservationarebriefexcerpts inconnectionwithreviewsorscholarlyanalysisormaterialsuppliedspecificallyforthepurposeofbeing enteredandexecutedonacomputersystem,forexclusiveusebythepurchaserofthework.Duplication ofthispublicationorpartsthereofispermittedonlyundertheprovisionsoftheCopyrightLawofthe Publisher’s location, in its current version, and permission for use must always be obtained from Springer.PermissionsforusemaybeobtainedthroughRightsLinkattheCopyrightClearanceCenter. ViolationsareliabletoprosecutionundertherespectiveCopyrightLaw. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexempt fromtherelevantprotectivelawsandregulationsandthereforefreeforgeneraluse. While the advice and information in this book are believed to be true and accurate at the date of publication,neithertheauthorsnortheeditorsnorthepublishercanacceptanylegalresponsibilityfor anyerrorsoromissionsthatmaybemade.Thepublishermakesnowarranty,expressorimplied,with respecttothematerialcontainedherein. Printedonacid-freepaper SpringerispartofSpringerScience+BusinessMedia(www.springer.com) We like to dedicate this book to Schwinne C. Lee, Jennifer Lee, Michael Lee, and Michelle Lee. Cheng-Few Lee, John C. Lee, and Alice C. Lee About the Authors Cheng-Few Lee is a Distinguished Professor of Finance at Rutgers Business School, Rutgers University and was chairperson of the Department of Finance from 1988–1995. He has also served on the faculty of the University of Illinois (IBE Professor of Finance) and the University of Georgia. He has maintained academicandconsultingtiesinTaiwan,HongKong,ChinaandtheUnitedStates for the past three decades. He has been a consultant to many prominent groups including,theAmericanInsuranceGroup,theWorldBank,theUnitedNationsand TheMarmonGroupInc.,WintekCorporationandPolarisFinancialGroup,etc. Professor Lee founded the Review of Quantitative Finance and Accounting (RQFA) in 1990 and the Review of Pacific Basin Financial Markets and Policies (RPBFMP)in1998,andservesasmanagingeditorforbothjournals. Hewasalso a co-editor of the Financial Review (1985–1991) and the Quarterly Review of EconomicsandBusiness(1987–1989). In the past thirty-nine years, Dr. Lee has written numerous textbooks ranging in subject matter from financial management to corporate finance, security analysisandportfoliomanagementtofinancialanalysis,planningandforecasting, and business statistics. Dr. Lee has also published more than 200 articles in more than twenty different journals in finance, accounting, economics, statistics, and management.ProfessorLeehasbeenrankedthemostpublishedfinanceprofessor worldwideduring1953–2008. AliceC.LeeiscurrentlyavicepresidentinfinanceatStateStreetCorporation, headingupagroupthatprovidesanalyticsandvaluationsinsupporttothecorpo- rate Chief Accounting Officer. She was also previously a Vice President in the ModelValidationGroup,EnterpriseRiskManagement,atStateStreetCorporation. Her career spans over 20 years of experience, with a diverse background that includes academia, engineering, sales, and management consulting. Her primary areasofexpertiseandresearcharecorporatefinanceandfinancialinstitutions.She iscoauthorofStatisticsforBusinessandFinancialEconomics,2ndedand3rded (withChengF.LeeandJohnC.Lee),FinancialAnalysis,PlanningandForecasting, 2nd ed (with Cheng F. Lee and John C. Lee), and Security Analysis, Portfolio Management, and Financial Derivatives (with Cheng F. Lee, Joseph Finnerty, vii viii AbouttheAuthors John C. Lee and Donald Wort). In addition, she has coedited other annual publications including Advances in Investment Analysis and Portfolio Manage- ment(withChengF.Lee). JohnC.LeeisaMicrosoftCertifiedProfessionalinMicrosoftVisualBasicand Microsoft Excel VBA. He has a Bachelor and Masters degree in accounting from theUniversityofIllinoisatUrbana-Champaign.Johnhasworkedover20yearsin boththebusinessandtechnicalfieldsasanaccountant,auditor,systemsanalystand as a business software developer. He is the author of the book on how to use MINITABandMicrosoftExceltodostatisticalanalysiswhichisacompaniontext to Statistics of Business and Financial Economics, of which he is one of the co- authors. In addition, he also published Financial Analysis, Planning and Forecasting, 2ed. (with Cheng F. Lee and Alice C. Lee) , and Security Analysis, Portfolio Management, and Financial Derivatives (with Cheng F. Lee, Joseph Finnerty, Alice C. Lee and Donald Wort). John has been a Senior Technology Officer at the Chase Manhattan Bank, Assistant Vice President at Merrill Lynch and Associated Director at UBS. Currently, he is the Director of the Center for PBBEFResearch. Preface to the Third Edition Since the first edition of this book was published in 1993, and the second edition waspublishedin2000,ithasbeenwidelyusedinuniversitiesintheUnitedStates, Asia,Europe,andothercountries.Thefollowinguniversitieshadadoptedthisbook asacoursetext(Hereisapartiallistoftheschoolsthathaveadoptedthisstatistics book. However, it is not a full list because publishers do not have access to the wholesaler’slistofschoolsthatpurchasethisbook): AarhusSchoolofBusiness,Denmark StateUniversityofNewYork–Binghamton University,USA UniversityofAlabama,USA NorwegianSchoolofEconomics&Business Administration,Norway AoyamaGakunUniversity,Japan UniversityofNorthCarolinaatGreensboro, USA UniversityofArkansas,USA UniversityofNotreDame,USA BogaziciUniversity,Turkey ReadingUniversity,England,UK UniversityofCalifornia,LosAngeles,USA RutgersUniversity,USA CarnegieMellonUniversity,USA SanFranciscoStateUniversity,USA ChaminadeUniversityofHonolulu,USA StJoseph’sCollege-SuffolkCampus,USA CatholicUniversityofAmerica,USA UniversityofSt.Thomas,USA NationalChengKungUniversity,Taiwan SuffolkUniversity,USA ClearyUniversity,USA NationalTaiwanUniversity,Taiwan NationalChiaoTungUniversity,Taiwan VirginiaPolytechnic&StateUniversity,USA UniversityofGothenburg,Sweden WashingtonUniversity,USA CityUniversityofHongKong,China WesternKentuckyUniversity,USA UniversityofHartford,USA WesternWashingtonUniversity,USA UniversityofIllinoisatChicago,USA UniversityofIllinoisMedicalCenter,USA KainanUniversity,Taiwan NorthernIllinoisUniversity,USA MonmouthUniversity,USA NewYorkUniversity,USA ix

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Statistics for Business and Financial Economics, 3rd edition is the definitive Business Statistics book to use Finance, Economics, and Accounting data throughout the entire book. Therefore, this book gives students an understanding of how to apply the methodology of statistics to real world situatio