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IMC > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

Primary data used for?

A

Specific projects in mind

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2
Q

What does ons produce

A

Financial, economic and social data nationally and regionally

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3
Q

Who produces detailed data on banking flows?

A

Bank for international settlement

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4
Q

Cross section data?

A

Data collected at one point in time for multiple subjects

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5
Q

Time series data

A

Data collected for a single variable over time

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6
Q

Population?

A

All member in a well defined set

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7
Q

What is a sample

A

A subset of a population

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8
Q

Parameter

A

Number that describes the population

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9
Q

What is a statistic

A

Number that describes the sample

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10
Q

What is an unbiased sample and what makes it unbiased

A

Sample is representative of population. Sample is random and sufficiently large

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11
Q

What are the 3 probability sampling methods

A

Random
Systematic
Stratified

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12
Q

What are the 4 non probability sampling methods

A

Convenience sampling
Judgement sampling
Quota sampling
Snowball sampling

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13
Q

Random sampling

A

Each member in population has equal likelihood of being chosen

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14
Q

Systematic

A

Every person in population is given a number and the nth person of population is chosen. Eg every 10th person. Fine as long as no hidden list in population numbering

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15
Q

stratified sampling?

A

subset of population are created depending on certain characteristics. This ensure also groups are represented in sample

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16
Q

Convenience sampling

A

Take people closets to you

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17
Q

Judgement sampling

A

Judge what people will make a representative sample and choose them

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18
Q

Quota sampling

A

Same as stratified but once subgroups created then convineice or judgement sampling is used

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19
Q

Snowball sampling

A

Desired characteristics are hard to find so you use initial subjects contacts to find rest of sample.

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20
Q

What problem can arrive from interval end frequency data

A

Wide intervals can lose data

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21
Q

What is a limitation of continuous data

A

The accuracy of the measuring equipment

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22
Q

Histograms

A

Continuous data that is split into intervals where the area of the bar represents the frequency

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23
Q

Scatter diagrams and how are they usually plotted - i e what variable goes on which axis?

A

Good for relationship between two variables, usually put variable that causes change on x axis and variable that is affected on the y

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24
Q

What is the common logarithmic of 100 and 1000

A

2 and 3

25
Q

What does logged data allow us to do?

A

Plot non linear data as linear

26
Q

What are the two types of summary data

A

Central tendency and dispersion data

27
Q

What number is used for the median value of 300 numbers

A

The average of 150th and 151st numbers

28
Q

What is the general rule between arithmetic me and and geometric mean and what affects this

A

Arithmetic mean is greater than geometric mean and the more volatile the series, the greater the difference between the two.

29
Q

What causes a positive skew graph

A

Mean is greater than median which is greater than mode

30
Q

What is a negative skew graph caused by

A

Mode is greater then median which is greater than mean

31
Q

When do we get symetrically distributed graph

A

Mean = mode = median

32
Q

What is a relative frequency table

A

Probability distribution table

33
Q

What is the spread of data above the mean for perfect symmetrical data

A

50% of data is larger than the mean.

34
Q

What factors affect the shape of a bell curve

A

Mean, describes location of the peak
Standard deviation describes the height and width of curve

35
Q

What percentages of data lies within 1, 2 and 3 standard deviations of the mean?

A

68% in 1 sd, 95% in 2 sd and 99% in 3sd

36
Q

What is total area under a bell curve

A

100%

37
Q

Problem with bell curves?

A

Frequency of extreme events is much higher than what a normal distribution predicts as these events likelihoods have fat tails and normal distribution have thin tails

38
Q

What does increasing the sample size do for sample mean

A

Decreases the standard deviation for the sample mean

39
Q

2 measures of correlation

A

Rank correlation and simple correlation

40
Q

Example of correlation null and alternative hypothesis s

A

Null: there is no correlation between variable
Alternative: there is correlation between variables

41
Q

What method is used to minimise the sum of all errors

A

Ordinary least squares.as line of best fit cannot go through all points

42
Q

What is a characteristic of a line that minimises error

A

Goes through the x and y mean

43
Q

What does r squared mean? example of r squared of 34%

A

Proration of variance in the dependant variable that can be explained by the independent variable. Example= 34% f variability has been accounted for =, 66% of variability is unexplained

44
Q

What is the false assumption used for extrapolation

A

Relationship remains linear outside of the sample range and consumer behaviour is unchanged

45
Q

OLS estimator ideal qualities?

A

BLUE = best linear unbiased estimator

46
Q

What does best mean in blue

A

Least variance of estimator that is linear and unbiased

47
Q

What does unbiased mean in blue

A

Mean of sample is equal to mean of population

48
Q

Characteristics of blue

A

Expected errors is equal to zero, errors are uncorrelated and errors have equal variances

49
Q

What creates a bias estimator

A

Errors correlated

50
Q

What happens is errors of estimator are not constant

A

We get heteroskedasctitcy. Still remains unbiased but SD is wrong

51
Q

What could be a cause of error correlation for estimates

A

If we have omitted variables

52
Q

What is irr

A

Interest rate that makes NPV equal to zero

53
Q

Investment decision making rules for irr and NPV

A

IRR greater than cost of cap

Npv greater than zero

Then project goes ahead

54
Q

What does NPV do that IRR doesn’t

A

Maximises wealth of investors

55
Q

What does irr maximise

A

Investment return

56
Q

What does irr assume

A

Cash flows reinvested at same rate as as original project

57
Q

Problem with irr

A

Cannot handle multiple discount rates and multiple cash flow sign changes

58
Q

If project y has higher NPV and lower irr compared to x then…

A

Y has later cash flows because not able to reinvest money

IMC (2 decks)

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