Flashcards in Quantitative Methods IV Deck (20):

1

## Binomial distribution

### Success and failure, where prob is constant for each trial

2

## Binomial expected value

###
E(x) = N * P

Number of trials * probability of success

3

## Binomial variance

### N * P * (1-P)

4

## Continuous uniform distribution

###
Prob of outcome = % of range

I.e. range = 2 to 12, prob of 4 to 8 = (8-4) / (12-2)

5

## Normal distribution

###
mean = mode = median

Kurtosis = 3

Skewness = 0

6

##
Multivariate distributions

Mean

Variance

Correlation

###
N means

N variances

0.5*N*(n-1) pairs of correlation

7

## Confidence intervals for normal distribution

###
90% = -1.65s to 1.65s

95% = -1.96s to 1.96s

99% = -2.58s to 2.58s

8

## Z-score

###
(sample mean - hypothesized mean) / standard error

How many stdevs away from the mean you are

Standardized so mean = 0, stdev = 1

9

## Lognormal distributions

###
e^x

Skewed to the right and bounded by zero, useful with non negative asset prices

10

##
Compounding with continuous periods

Effective annual rate

###
e^r - 1

R = return

11

##
Compounding with continuos periods

Convert effective rate to stated rate

### Ln(effective rate + 1)

12

## Stratified random sample

###
Classification system to separate into subgroups and then take samples based on size relative to population.

Guaranteed to sample from each stratum, not true of simple random sample.

13

## Central limit theorem

###
Sample distribution approaches normal as sample grows

Variance of distribution of sample means = variance / n

14

## Standard error of sample mean

### standard deviation / sqrt(N)

15

## Level of significance

### 5% significance = 95% confidence

16

## T distribution properties

###
One-tailed probabilities

Degrees of freedom = n - 1

17

## Normal, unknown variance, small or large sample

### T-statistic

18

## Non-normal, regardless of var, small sample

### Cannot use T or Z

19

## Normal, known variance, small or large

### Z-statistic

20