An investment firm looked at 200 mergers between small companies and found that 128 of the new (merged) company’s stock price dropped immediately after the merger. They also determined that 19 of the companies whose stock rose in price had merger managers with experience from prior mergers.
The investment firm completed a contingency table based on their analysis. Use the information in the table to discuss the following questions.
|Stock Price Rises
|Stock Price Falls
Response parameters: Does knowing if the merger manager has prior experience help the investment firm determine which mergers to invest in?
What does your answer imply about the statistical relationship between the stock prices and the experience of the manager?
Use the relationship between marginal, joint and conditional probability from this week’s lesson to justify your answers.