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CFA Condensed > Quant > Flashcards

Quant Flashcards

(74 cards)

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1
Q

Holding period return

A
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2
Q

Leveraged return

A
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3
Q

Gordon growth model

A
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4
Q

Implied yield

A
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5
Q

What is Kurtosis

A

Degree at which distribution is peaked

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6
Q

What does platykuratic mean

A

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

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7
Q

What does excess kurtosis mean

A

More or less kurtosis than a normal distribution

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8
Q

If a distribution is positive what does that mean

A

Means it is right tailed

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9
Q

What does it mean if a distribution is negative

A

It is left tailed

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10
Q

How to work out correlation

A

Covariance/sDxSd

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11
Q

Relative dispersion

A
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12
Q

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

A

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

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13
Q

What does Roy’s safety criterion state?

A

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

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14
Q

What skew does a log normal distribution have?

A

Positive

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15
Q

What is a log normal distribution useful for

A

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

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16
Q

What is a Monte Carlo simulation

A

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

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17
Q

What is bootstrapping

A

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

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18
Q

What is judgemental sampling?

A

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

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19
Q

What is stratfied random sampling

A

Separates a population but assumes that each subset

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20
Q

What is standard error of sample mean?

A
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21
Q

What is jackknife method

A

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

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22
Q

What is central limit theorem

A

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

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23
Q

What is sampling error

A

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

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24
Q

What is a null hypothesis

A

Hypothesis you want to reject (H0)

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25
What is an alternative hypothesis?
(Ha) concluded if there is evidence to reject the null
26
What happens when the null hypothesis is rejected?
Then Ha is valid
27
What is a type I error
Rejection of H0 when it’s actually true
28
What is a type II error
Failure to reject the null hypothesis when it’s actually false
29
What are the steps in hypothesis testing
30
What is significance level
Probability of making a type I error (rejecting the null when it’s true)
31
If I do not reject H0 when H0 is true what have I done?
Made the right choice (No effect, didn’t find one)
32
What is a parametric test
Make assumptions regarding the distribution of the population from which samples are drawn
33
Non-parametric tests
Either do not consider a population parameter or have few assumptions about the sampled population
34
What is a contingency table
2 dimensional array with rows that represent attributes of one of the variables and columns that represent attributes with the other variable
35
What is the test for independence from a contingency table
36
Define regression line
Line through the scatter plot of x and y that minimises the sum of the squared errors (sum of squared errors)
37
Equation for intercept term
38
How to work out the slope in the anova analysis?
Square root of R
39
What is a log lin model
If the depended variable is transformed while the independent variable is linear
40
What is a lin-log model
If the independent variable is transformed while the dependent variable is linear
41
What is a log log model
If both variables are transformed
42
What is a dependent variable?
Referred to as the explained variable the endogenous variable or the predicted variable (Y)
43
What is the independent variable
X variable - referred to as the explanatory variable or the predicting variable
44
What is the intercept term
45
What is the slope coefficient of the regression line?
46
47
48
How to calculate forward rate with interest rates
49
What distribution is defined by a single parameter
Chi squared and t distribution
50
What is harmonic mean good for?
Appropriate for determining average price per unit
51
What two returns are the same
Geometric and time weighted
52
What do I do for TWR and MWR
TWR = geometric mean MWR = CF function
53
How to work out the interquartile range?
Difference between the lowest value in the second quartile and the highest value in the third quartile
54
For a positively skewed distribution what is the largest average
The mean
55
What is MWR the same as
IRR
56
What is the power of the test
Probability of rejecting the null when it is false
57
What does the alternative hypothesis do?
Exhausts all potential parameter values not accounted for by the null hypothesis
58
Probability of rejecting a false null hypothesis is best described as what?
1- probability of a type 2 error
59
What ildoes the residual represent in a regression equation
Estimated value using a fitted regression line based on the sample
60
What is homoskedascitiy
When the variance of the residuals of a regression is constant across observations
61
What is the power of the test
1 - probability of a type 2 error
62
If we are more likely to reject a false null what does that mean
More powerful test
63
What does a non parametric test assume
That the distribution is not Normal
64
When is a non parametric test useful when the data is…
Ordinal or sample sizes are small
65
What is the sample correlation coefficient for a parametric test of a t distribution
66
What is the regression line
Line through the scatter plot of which x and y that minimizes the sum of squared erros
67
What is sum of squared errors
Differences between the Y values predicted by the regression equation and the observed values of y
68
What does SST measure
Total variation in the dependent variable
69
What does SSR measure
Measures the variation in the dependent variable that is explained by the independent variable
70
What does SSE measure
Measures the variation in the dependent variable that is not explained by the dependent variable
71
What does R squared or coefficient of determination measure?
The proportion of the total variation in the dependent variable that is explained by the independent variable
72
What is formula for mean squared error (MSE)
73
Standard error of estimate
74
How to get F statistic

CFA Condensed (10 decks)

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