Quantitative Methods II Flashcards Preview

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Flashcards in Quantitative Methods II Deck (18):
1

Descriptive vs. inferential

1. Descriptive: summarize large datasets
2. Inferential: forecasts/estimates of population based on statistical characteristics of a sample.

2

Measurement scales (NOIR)

1. Nominal - no order
2. Ordinal - categorized
3. Interval - equal distance, no zero
4. Ratio - equal w/ true zero

3

Median & Mode

1. Median - midpoint when arranged from lowest to highest.
2. Mode - occurs most often

4

Geometric mean

Think compounded/annualized returns, same concept

5

Harmonic mean

N / [sum(1/xi)]

6

Volatility and means?

harmonic < geometric < arithmetic

7

Percentile formula

(N+1) * (percentile / 100)

8

Mean absolute deviation (MAD)

Sum[abs(X - Xbar)] / n

9

Variance

Sum[(X - Xbar)^2] / n

Note: use n - 1 for sample

10

Standard deviation

square root of variance

11

Chebyshev's inequality

% of observations within k standard deviations of the mean is at least: 1 - 1/k^2

E.g. +-2stdev = 1 - 1/2^2 = 0.75

12

Coefficient of variation (CV)

CV = standard deviation of x / average value of x

Measures relative dispersion

13

Sharpe ratio

(portfolio return - risk free return) / standard dev. of portfolio

14

Positive skew

Outliers in the upper region or right tail

Mode < median < mean

15

Negative skew

Outliers int he lower tail

Mean < median < mode

16

Skew formula

(1/n) * [Sum((X-Xbar)^3) / stdev^3]

Positive = positive skew, etc

> 0.5 is significant

17

Excess kurtosis

Normal distribution = 3

Positive (>3) = leptokurtic i.e. more peaked

> 1 is rather large

18

Kurtosis formula

(1/n) * [Sum((X-Xbar)^4) / stdev^4]