Quant

Question 1

Holding period return

Answer 1

Question 2

Leveraged return

Answer 2

Question 3

Gordon growth model

Answer 3

Question 4

Implied yield

Answer 4

Question 5

What is Kurtosis

Answer 5

Degree at which distribution is peaked

Question 6

What does platykuratic mean

Answer 6

Wider less steep centre of distribution (think platypus’ beak)

Question 7

What does excess kurtosis mean

Answer 7

More or less kurtosis than a normal distribution

Question 8

If a distribution is positive what does that mean

Answer 8

Means it is right tailed

Question 9

What does it mean if a distribution is negative

Answer 9

It is left tailed

Question 10

How to work out correlation

Answer 10

Covariance/sDxSd

Question 11

Relative dispersion

Answer 11

Question 12

What is shortfall risk and what formula would you use to help you?

Answer 12

Probability that a portfolios return or value will be below a specified target return or value over a specified period. Use Roy’s safety criterion

Question 13

What does Roy’s safety criterion state?

Answer 13

States that the optimal portfolio minimises the probability that the return of the portfolio will fall below some minimum acceptable threshold level

Question 14

What skew does a log normal distribution have?

Answer 14

Positive

Question 15

What is a log normal distribution useful for

Answer 15

Modelling asset prices if we think of an assets future price as the result of a continuously compounded return on its current price

Question 16

What is a Monte Carlo simulation

Answer 16

Type of sample performed by making assumptions about the distributions of prices or risk factors using large number of generated values to generate a distribution of possible outcomes

Question 17

What is bootstrapping

Answer 17

Draw repeated samples from the full data set replacing the observations each time

Question 18

What is judgemental sampling?

Answer 18

Refers to samples for which each observation is selected from a larger data set based on judgement

Question 19

What is stratfied random sampling

Answer 19

Separates a population but assumes that each subset

Question 20

What is standard error of sample mean?

Answer 20

Question 21

What is jackknife method

Answer 21

Alternative way to calculate standard error of sample mean. One observation is removed

Question 22

What is central limit theorem

Answer 22

States that sampling distribution of the mean approaches a normal probability distribution with mean mu and a variance equal to SD squared divided by n as sample gets larger than 30

Question 23

What is sampling error

Answer 23

Difference between the observed value of a statistic and the quantity it is intended to estimate

Question 24

What is a null hypothesis

Answer 24

Hypothesis you want to reject (H0)

Question 25

What is an alternative hypothesis?

Answer 25

(Ha) concluded if there is evidence to reject the null

Question 26

What happens when the null hypothesis is rejected?

Answer 26

Then Ha is valid

Question 27

What is a type I error

Answer 27

Rejection of H0 when it’s actually true

Question 28

What is a type II error

Answer 28

Failure to reject the null hypothesis when it’s actually false

Question 29

What are the steps in hypothesis testing

Answer 29

Question 30

What is significance level

Answer 30

Probability of making a type I error (rejecting the null when it’s true)

Question 31

If I do not reject H0 when H0 is true what have I done?

Answer 31

Made the right choice (No effect, didn’t find one)

Question 32

What is a parametric test

Answer 32

Make assumptions regarding the distribution of the population from which samples are drawn

Question 33

Non-parametric tests

Answer 33

Either do not consider a population parameter or have few assumptions about the sampled population

Question 34

What is a contingency table

Answer 34

2 dimensional array with rows that represent attributes of one of the variables and columns that represent attributes with the other variable

Question 35

What is the test for independence

Answer 35

Question 36

Define regression line

Answer 36

Line through the scatter plot of x and y that minimises the sum of the squared errors (sum of squared errors)

Question 37

Equation for intercept term

Answer 37

Question 38

How to work out the slope in the anova analysis?

Answer 38

Square root of R

Question 39

What is a log lin model

Answer 39

If the depended variable is transformed while the independent variable is linear

Question 40

What is a lin-log model

Answer 40

If the independent variable is transformed while the dependent variable is linear

Question 41

What is a log log model

Answer 41

If both variables are transformed

Question 42

What is a dependent variable?

Answer 42

Referred to as the explained variable the endogenous variable or the predicted variable (Y)

Question 43

What is the independent variable

Answer 43

X variable - referred to as the explanatory variable or the predicting variable

Question 44

What is the intercept term

Answer 44

Question 45

What is the slope coefficient of the regression line?

Answer 45

Question 48

How to calculate forward rate

Answer 48

Question 49

What distribution is defined by a single parameter

Answer 49

Chi squared and t distribution

Question 50

What is harmonic mean good for?

Answer 50

Appropriate for determining average price per unit

Question 51

What two returns are the same

Answer 51

Geometric and time weighted

Question 52

What do I do for TWR and MWR

Answer 52

TWR = geometric mean MWR = CF function

Question 53

How to work out the interquartile range?

Answer 53

Difference between the lowest value in the second quartile and the highest value in the third quartile

Question 54

For a positively skewed distribution what is the largest?

Answer 54

The mean

Question 55

What is MWR the same as

Answer 55

IRR