Statistical Concepts & Market Returns

Question 0

Parameter

Answer 0

A descriptive measure of a population characteristic.

Question 1

Population

Answer 1

All members of a specified group

Question 2

Sample

Answer 2

A subset of a population.

Question 3

Sample statistic

Answer 3

A quantity computed from or used to describe a sample.

Question 4

Nominal scale

Answer 4

Categories according to style, rather than rank. (Weakest level; ie. small cap, large cap)

Question 5

Ordinal scales

Answer 5

Sorts data into ranked categories, but not necessarily equal, or scaled categories (S&Ps star ratings)

Question 6

Interval scales

Answer 6

Provide not only ranking, but assurance that the difference between scales are equal.

Question 7

Ratio scales

Answer 7

Interval scale, but with a true zero, true scale.

Question 8

Mesokurtic

Answer 8

Distribution identical to normal distribution.

Question 9

Platykurtic

Answer 9

A distribution that is less peaked than normal.

Question 10

Leptokurtic

Answer 10

A distribution that is more peaked than normal.

Question 11

Kurtosis

Answer 11

Statistical measure that tells us when a distribution is more or less peaked than a normal distribution.

Question 12

Negatively skewed distribution

Answer 12

Long tail on left side. Mean is less than median is less than mode.

Question 13

Positively skewed distribution

Answer 13

Long tail on its right side. Mode is less than median is less than mean.

Question 14

Sharpe ratio formula

Answer 14

Mean return of portfolio minus mean return of risk free asset. Divided by standard deviation of portfolio.

Question 15

Target semideviation

Answer 15

The positive square root of target semi variance.

Question 16

Target semivariance

Answer 16

The average squared deviation below a target value.

Question 17

Linear interpolation

Answer 17

Estimating an unknown value on the basis of two values around it.

Question 18

Percentile

Answer 18

L = (n+1) y/100
y

Y= percentage at which we divide distribution
Ly= location of percentile
N= number of samples in distribution

Question 19

Dispersion

Answer 19

The variability around the central tendency. If mean addresses reward, then dispersion measures risk.

Question 20

Range

Answer 20

Maximum value minus minimum value.

Question 21

Histogram

Answer 21

A bar chart of data that have been grouped into a frequency distribution.

Question 22

Frequency polygon

Answer 22

A group of frequency distributions obtained by drawing straight lines joining successive points representing the class frequencies.

Question 23

Measure of central tendency

Answer 23

Specifies where the data are centered.

Question 24

Arithmetic mean

Answer 24

Sum of observations divided by the number of observations.

Question 25

Population mean

Answer 25

The arithmetic value of a population

Question 26

Sample mean

Answer 26

Arithmetic mean of a sample.

Question 27

Cross sectional data

Answer 27

Observations over individual units at a point in time.

Question 28

Time series data

Answer 28

Observations of a variable over time

Question 29

Median

Answer 29

The value of the middle item of a ordered set.

Question 30

Mode

Answer 30

Most frequently occurring value in a distribution

Question 31

Weighted mean

Answer 31

An average in which each observation is weighted by an index of its relative importance.

Question 32

Expected value

Answer 32

The weighted average of forward looking data

Question 33

Chebyshev’s inequality

Answer 33

For any distribution with finite variance, the proportion of the observations within k standard deviations of the arithmetic mean is at least 1 - 1/k2

Question 34

Coefficient of variation

Answer 34

Used to find relative dispersion. The ratio of the standard deviation of a set of observations to their mean value.

Question 35

Frequency distribution

Answer 35

A tabular display of summarized data in a relatively small number of intervals. Frequency distributions permit us to evaluate how data are distributed.

Question 36

Relative frequency of observations

Answer 36

The number of observations in the interval divided by the total number of observations.

Question 37

Cumulative relative frequency

Answer 37

Summed relative frequencies as we move from the first interval to the last, thus giving the fraction of the observations that are less than the upper limit of each value.