Secret Sauce Review Flashcards
Standard Error of Sample Mean eqn & explain
STDV/ SQR root of n
Essentially the standard deviation of the means of the sample
Confidence Interval (Simple) explanation
mean value plus/ minus the corresponding Z score times the standard error
Shortfall Risk is the risk that
a portfolios return will be below the targer return
SFR states that
a portfolio should minimize the risk of the return underpreforming
Continuously compounded Returns (CCR) eqn
Ln(1 +HPR) = Ln(end value/beg. value)
Data mining bias
when research is based off other research, instead of testable economic theory
Survivorship Bias
- Most databases only include firms that are still in existance ie survived
- Most Common Bias
When to use a two tailed test?
to se if the parameter is different from a specified value
When to use a one tailed test?
to see if something is ABOVE or BELOW a specified value
Most Common test statistics
t-statistic and z-statistic
Type I error
False rejection of the null hypothesis
Type II error
Failure to reject the null when it is actually false
What is the Significant Level?
the probability of making a Type I error
Change in Polarity Principal
support levels that bave been broken become resistance levels & vice versa
Moving Line Averages
- arithmetic mean of the last X days of closing prices
- Used to smooth fluctuation in a price chart
Bollinger Bands
drawn with a given number of STDVs above and below a moving average line.
Prices are believed to fall when the reach the upper band.
A negitive coefficient on income in a demand function denotes
that the good is inferior
English Auction
ascending price auction, highest bid wins the item
Vickrey Auction
highest bid wins the item, but pays the next highest bid amount
Dutch Auction
Price is reduced until a bidder is willing to pay the price
Substitution effect is
always positive
Giffen Good
decrease in price leads to a decrease in Qd
-Supported by theory
Veblen Good
an increase in price causes an increase in value to some consumers
Explicit Costs
accounting expenses that are deducted on the income statement
