Statistical Concepts & Market Returns Flashcards
Parameter
A descriptive measure of a population characteristic.
Population
All members of a specified group
Sample
A subset of a population.
Sample statistic
A quantity computed from or used to describe a sample.
Nominal scale
Categories according to style, rather than rank. (Weakest level; ie. small cap, large cap)
Ordinal scales
Sorts data into ranked categories, but not necessarily equal, or scaled categories (S&Ps star ratings)
Interval scales
Provide not only ranking, but assurance that the difference between scales are equal.
Ratio scales
Interval scale, but with a true zero, true scale.
Mesokurtic
Distribution identical to normal distribution.
Platykurtic
A distribution that is less peaked than normal.
Leptokurtic
A distribution that is more peaked than normal.
Kurtosis
Statistical measure that tells us when a distribution is more or less peaked than a normal distribution.
Negatively skewed distribution
Long tail on left side. Mean is less than median is less than mode.
Positively skewed distribution
Long tail on its right side. Mode is less than median is less than mean.
Sharpe ratio formula
Mean return of portfolio minus mean return of risk free asset. Divided by standard deviation of portfolio.
Target semideviation
The positive square root of target semi variance.
Target semivariance
The average squared deviation below a target value.
Linear interpolation
Estimating an unknown value on the basis of two values around it.
Percentile
L = (n+1) y/100
y
Y= percentage at which we divide distribution Ly= location of percentile N= number of samples in distribution
Dispersion
The variability around the central tendency. If mean addresses reward, then dispersion measures risk.
Range
Maximum value minus minimum value.
Histogram
A bar chart of data that have been grouped into a frequency distribution.
Frequency polygon
A group of frequency distributions obtained by drawing straight lines joining successive points representing the class frequencies.
Measure of central tendency
Specifies where the data are centered.