Quantitative Methods IV Flashcards Preview

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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

Non-normal, known var, large sample

Z-Statistic