Statistical Concepts and Market return (reading 7)

Question 1

stats

Answer 1

is concept and rules - procedures to interpret data that we collected.

make prediction and inform decision

Question 2

Data

Answer 2

facts or observation that results from an investigation

Question 3

descriptive statistic

Answer 3

mean, variance, kurtosis, and skewness

provide simple summary regarding data

Question 4

inferential stat

Answer 4

use a statistical sample data to draw valid conclusion concerning the entire population (forecast, estimate, or judgment about the characteristics of a population)

probability distribution, hypo testing, correlation, regression analysis, probability distribution

Question 5

population

Answer 5

sum of all elements - totality of observation

Question 6

sample

Answer 6

part of a population, sample should represent all elements of a population as a whole.

looking at a sample can make a conclusion about the entire population

Question 7

parameter

Answer 7

Describe characteristics of a population. for example, mean value, the range of investment returns, the variance

example: include the population mean (Mu) and standard deviation (sigma)

Question 8

sample statistic or statistic

Answer 8

the same definition as stat - describe a characteristic of a sample.

example: include the average value X bar, sample standard deviation S.

Question 9

Type of measurement scale

Answer 9

• nominal scale
• ordinal scale
• interval scale

Question 10

Nominal scale

Answer 10

simple classification system under which the data is categorized into various types.

• does not rank the data
  it is the weakest level of measurement.
• no numerical meaning
  example: mutual fund 1 -small cap. mutual fund 2 - large cap.

example 1 represent male, 35 represent female.

Question 11

ordinal scale

Answer 11

used to represent ordered categories, an order of the category important but not the differences between them - can’t be quantified.

categorized data into various categories and also rank them into an order based on some characteristics

• the intervals separating the ranks in ordinal scaled - can’t be compared with each other
• it is a stronger level of measurement relative to nominal scale.

example: under morning star and standard&poor rating mutual funds.
a fund with 1 star - poor performance
fund with 5 stars - superior performance

example: asking someone how they are doing, 1-poor, 2-good, 3-excellent. rank from 1-3

Question 12

interval scale

Answer 12

measure the difference between intervals.

scale that rank the data into an order based on some characteristics and the differences between scale values are equal.

• The zero point of an interval scale does not reflect a true zero point or natural zero.
  example: difference in temperation 15 Celsius and 20 celsius, is the same amount difference in temperature 40 Fahrenheit and 45 Fahrenheit.

Question 13

Ratio scale

Answer 13

Strongest level of measurmenet

all the property of interval data. ratio of 2 values is meaningful.

example: I was 5 miles from my home. starting with 0.
- A true zero point as the origin exists.

Question 14

Data can be summarized how?

Answer 14

by using a frequency distribution.

Question 15

Frequency distribution

Answer 15

data is grouped into mutually exclusive categories and shows the number of observation in each class.

it also useful to id the shape of the distribution

Question 16

how many steps to the construction for frequency distribution?

Answer 16

7

Question 17

list the 7 steps to frequency distribution

Answer 17

Step 1: arrange the data in ascending order

step 2: calculate the range of the data (range = max value - min value)

step 3: choose the appropriate number of classes involves judgment

step 4: determine the class interval or width using the following formula

Step 5: Set the individual class limits

Step 6: Count the number of observations in each class interval.

Question 18

Step 1 of frequency distribution - what is the name?

Answer 18

arrange the data in ascending order.

Question 19

Step 2 of frequency distribution - what is the name?

Answer 19

calculate the range of the data

range = max value - min value

Question 20

Step 3 of frequency distribution - what is the name?

Answer 20

Choose the appropriate number of classes (k): determining the number of classes involves judgement

Question 21

Step 4 of frequency distribution - what is the name?

Answer 21

Determine the class interval or width using the following formula

I >= (H-L) / K

I = class interval 
h = highest observed value 
l = lowest observed value 
k = number of classes

Question 22

Step 5 of frequency distribution - what is the name?

Answer 22

Set the individual class limits

• last interval would be the one, which includes the max value
• ending point of intervals are determined by successively adding the interval width to the minimum value

Question 23

Step 6 of frequency distribution - what is the name?

Answer 23

count the number of observation in each class interval.

Question 24

Intervals

Answer 24

Sets of values within which an observation lies

• always round up. not round down - ensure the final classes interval included the max value of data
• class interval other name is : range or bins - do not overlap.

Question 25

What is the class interval other name

Answer 25

Range or bins

Question 26

do interval overlap?

Answer 26

no

Question 27

Relative frequency

Answer 27

% of observation falling within the class.

absolute frequency / total number of observation

Question 28

Cumulative absolute frequency

Answer 28

Sum of those frequencies.

it reflects the number of observations that are less than the upper limit of each interval.

Question 29

Absolute frequency

Answer 29

the actual number of observations in a given interval is called absolute frequency or simply frequency

Question 30

cumulative relative frequency

Answer 30

sums up the relative frequencies up to and including the given relative frequency

it reflects the percentage of observations that are less than the upper limits of each interval.