Chapter 7 Flashcards by Toby Hill

Primary data used for?

Specific projects in mind

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What does ons produce

Financial, economic and social data nationally and regionally

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Who produces detailed data on banking flows?

Bank for international settlement

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Cross section data?

Data collected at one point in time for multiple subjects

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Time series data

Data collected for a single variable over time

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Population?

All member in a well defined set

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What is a sample

A subset of a population

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Parameter

Number that describes the population

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What is a statistic

Number that describes the sample

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What is an unbiased sample and what makes it unbiased

Sample is representative of population. Sample is random and sufficiently large

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What are the 3 probability sampling methods

Random
Systematic
Stratified

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What are the 4 non probability sampling methods

Convenience sampling
Judgement sampling
Quota sampling
Snowball sampling

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Random sampling

Each member in population has equal likelihood of being chosen

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Systematic

Every person in population is given a number and the nth person of population is chosen. Eg every 10th person. Fine as long as no hidden list in population numbering

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stratified sampling?

subset of population are created depending on certain characteristics. This ensure also groups are represented in sample

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Convenience sampling

Take people closets to you

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Judgement sampling

Judge what people will make a representative sample and choose them

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Quota sampling

Same as stratified but once subgroups created then convineice or judgement sampling is used

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Snowball sampling

Desired characteristics are hard to find so you use initial subjects contacts to find rest of sample.

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What problem can arrive from interval end frequency data

Wide intervals can lose data

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What is a limitation of continuous data

The accuracy of the measuring equipment

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Histograms

Continuous data that is split into intervals where the area of the bar represents the frequency

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Scatter diagrams and how are they usually plotted - i e what variable goes on which axis?

Good for relationship between two variables, usually put variable that causes change on x axis and variable that is affected on the y

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What is the common logarithmic of 100 and 1000

2 and 3

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What does logged data allow us to do?

Plot non linear data as linear

What are the two types of summary data

Central tendency and dispersion data

What number is used for the median value of 300 numbers

The average of 150th and 151st numbers

What is the general rule between arithmetic me and and geometric mean and what affects this

Arithmetic mean is greater than geometric mean and the more volatile the series, the greater the difference between the two.

What causes a positive skew graph

Mean is greater than median which is greater than mode

What is a negative skew graph caused by

Mode is greater then median which is greater than mean

When do we get symetrically distributed graph

Mean = mode = median

What is a relative frequency table

Probability distribution table

What is the spread of data above the mean for perfect symmetrical data

50% of data is larger than the mean.

What factors affect the shape of a bell curve

Mean, describes location of the peak Standard deviation describes the height and width of curve

What percentages of data lies within 1, 2 and 3 standard deviations of the mean?

68% in 1 sd, 95% in 2 sd and 99% in 3sd

What is total area under a bell curve

100%

Problem with bell curves?

Frequency of extreme events is much higher than what a normal distribution predicts as these events likelihoods have fat tails and normal distribution have thin tails

What does increasing the sample size do for sample mean

Decreases the standard deviation for the sample mean

2 measures of correlation

Rank correlation and simple correlation

Example of correlation null and alternative hypothesis s

Null: there is no correlation between variable Alternative: there is correlation between variables

What method is used to minimise the sum of all errors

Ordinary least squares.as line of best fit cannot go through all points

What is a characteristic of a line that minimises error

Goes through the x and y mean

What does r squared mean? example of r squared of 34%

Proration of variance in the dependant variable that can be explained by the independent variable. Example= 34% f variability has been accounted for =, 66% of variability is unexplained

What is the false assumption used for extrapolation

Relationship remains linear outside of the sample range and consumer behaviour is unchanged

OLS estimator ideal qualities?

BLUE = best linear unbiased estimator

What does best mean in blue

Least variance of estimator that is linear and unbiased

What does unbiased mean in blue

Mean of sample is equal to mean of population

Characteristics of blue

Expected errors is equal to zero, errors are uncorrelated and errors have equal variances

What creates a bias estimator

Errors correlated

What happens is errors of estimator are not constant

We get heteroskedasctitcy. Still remains unbiased but SD is wrong

What could be a cause of error correlation for estimates

If we have omitted variables

What is irr

Interest rate that makes NPV equal to zero

Investment decision making rules for irr and NPV

IRR greater than cost of cap Npv greater than zero Then project goes ahead

What does NPV do that IRR doesn’t

Maximises wealth of investors

What does irr maximise

Investment return

What does irr assume

Cash flows reinvested at same rate as as original project

Problem with irr

Cannot handle multiple discount rates and multiple cash flow sign changes

If project y has higher NPV and lower irr compared to x then…

Y has later cash flows because not able to reinvest money

What type of index is the FTSE 30

Equally weighted geometric index

What index’s are market weighted arithmetic index

FTSE all world indices Cac 40 Dax FTSE 100

What type of index do the following use: FTSE all world indices Cac 40 Dax FTSE 100

Market weighted arithmetic index

What type of index does the Dow jones use

Dimple aggregation of unweighted share prices for 30 large us blue chip stocks

What type of index does s and p 500 use

Market weighted average

What is the coefficient of variation =

Ratio of SD to the mean of pop

What type of model is market model and what does it model

Bivariate model Relate return on a security to a constant and return on market