SS 2. Quantitative Methods: Basic Methods Flashcards
Coefficient of Variation (CV) =
Standard Deviation
/
Expected Return (or mean)
Mutual funds that hold high cash positions are most likely viewed by technical analysts as being:
bullish.
A time series calculated as the cumulative number of daily advances less daily declines is known as:
Breadth of market
The market-determined interest rate is equal to:
the real risk-free rate of return
+ an inflation premium
+ risk premiums for default risk, liquidity, and maturity
‘The difference between the observed value of a statistic and the quantity it is intended to estimate’ describes:
The Sampling Error
Correlation Coefficent =
Covariance (X,Y)
/
(SD of X)(SD of Y)
The null hypothesis is most appropriately rejected when the p-value is close to:
Zero
A descriptive measure of a population characteristic is best described as a:
parameter
To test whether a particular portfolio’s volatility has changed following the global financial crisis of 2008, an analyst must compare the portfolio’s mean monthly returns and the variances of returns of the pre- and post-crisis periods. The most appropriate test is the:
F-Test
In generating an estimate of a population parameter, a larger sample size is most likely to improve the estimator’s:
Consistency
A statistically significant result is one that supports the rejection of the:
null hypothesis
Nonparametric tests are primarily concerned with (3):
Ranks, signs or groups
Not numerical values
The total probability rule is used to calculate:
The unconditional probability of the occurrence of an event given the conditional probabilities
Sharpe Ratio =
(Portfolio return - Risk-free rate)
/
Standard deviation
For a negatively skewed distribution, the mode will be _______ than the mean and median.
Greater.
This is due to negative outliers that reduce the sum of observations that are used to calculate the mean. The median is usually lower than the mode in negatively skewed distributions.
T-bills are considered (nominal/real) risk-free rates
Nominal, since they can contain a premium for expected inflation.
Total Risk is a synonym for:
Standard Deviation
The F-test is used to test the equality of two:
variances
A priori probability is (empirical/subjective)
Subjective
The probability of generating a random number equal to any fixed point under a continuous uniform distribution is:
Zero
Using the IRR method, which type of return can be calculated?
Money-weighted return
The total probability rule is used when an analyst is interested in:
all potential outcomes
Chebyshev’s Inequality formula =
1 - (1 / k^2)
When analyzing a head and shoulders pattern that represents the reversal of an upward trend, the highest trading volume is most likely on the upward side of the:
left shoulder
With regards to the Polarity principle, once a support level is breached, it becomes a:
Resistance level
Money Market Yield =
HPY * (360/t)
where t = number of days
Which test should be used to evaluate the difference between the means of two normally distributed populations?
An approximate t-test
An approximate t-test is used to test the differences between means of two populations when the unknown population variances cannot be assumed to be equal.
A probability density function describes the probability of a:
continuous random variable
The probability of rejecting a true null hypothesis is a:
Type I error
Standard Error of the sample mean =
Population standard deviation (S)
/
Square root of the number of observations in the sample (n)
P(AB) =
P(A | B) x P(B)
Roy’s Safety-First Ratio =
E(r) - Threshold Return
/
Standard Deviation
In generating an estimate of a population parameter, a larger sample size is most likely to improve the estimator’s:
Consistency
Investors should be most attracted to return distributions that are:
Positively skewed
Investors should be attracted by a positive skew (distribution skewed to the right) because the mean return falls above the median. Relative to the mean return, positive skew amounts to a limited, though frequent, downside compared with a somewhat unlimited, but less frequent, upside.
