SS 2. Quantitative Methods: Basic Methods

Question 1

Coefficient of Variation (CV) =

Answer 1

Standard Deviation
/
Expected Return (or mean)

Question 2

Mutual funds that hold high cash positions are most likely viewed by technical analysts as being:

Answer 2

bullish.

Question 3

A time series calculated as the cumulative number of daily advances less daily declines is known as:

Answer 3

Breadth of market

Question 4

The market-determined interest rate is equal to:

Answer 4

the real risk-free rate of return
+ an inflation premium
+ risk premiums for default risk, liquidity, and maturity

Question 5

‘The difference between the observed value of a statistic and the quantity it is intended to estimate’ describes:

Answer 5

The Sampling Error

Question 6

Correlation Coefficent =

Answer 6

Covariance (X,Y)
/
(SD of X)(SD of Y)

Question 7

The null hypothesis is most appropriately rejected when the p-value is close to:

Answer 7

Zero

Question 8

A descriptive measure of a population characteristic is best described as a:

Answer 8

parameter

Question 9

To test whether a particular portfolio’s volatility has changed following the global financial crisis of 2008, an analyst must compare the portfolio’s mean monthly returns and the variances of returns of the pre- and post-crisis periods. The most appropriate test is the:

Answer 9

F-Test

Question 10

In generating an estimate of a population parameter, a larger sample size is most likely to improve the estimator’s:

Answer 10

Consistency

Question 11

A statistically significant result is one that supports the rejection of the:

Answer 11

null hypothesis

Question 12

Nonparametric tests are primarily concerned with (3):

Answer 12

Ranks, signs or groups

Not numerical values

Question 13

The total probability rule is used to calculate:

Answer 13

The unconditional probability of the occurrence of an event given the conditional probabilities

Question 14

Sharpe Ratio =

Answer 14

(Portfolio return - Risk-free rate)
/
Standard deviation

Question 15

For a negatively skewed distribution, the mode will be _______ than the mean and median.

Answer 15

Greater.

This is due to negative outliers that reduce the sum of observations that are used to calculate the mean. The median is usually lower than the mode in negatively skewed distributions.

Question 16

T-bills are considered (nominal/real) risk-free rates

Answer 16

Nominal, since they can contain a premium for expected inflation.

Question 17

Total Risk is a synonym for:

Answer 17

Standard Deviation

Question 18

The F-test is used to test the equality of two:

Answer 18

variances

Question 19

A priori probability is (empirical/subjective)

Answer 19

Subjective

Question 20

The probability of generating a random number equal to any fixed point under a continuous uniform distribution is:

Answer 20

Zero

Question 21

Using the IRR method, which type of return can be calculated?

Answer 21

Money-weighted return

Question 22

The total probability rule is used when an analyst is interested in:

Answer 22

all potential outcomes

Question 23

Chebyshev’s Inequality formula =

Answer 23

1 - (1 / k^2)

Question 24

When analyzing a head and shoulders pattern that represents the reversal of an upward trend, the highest trading volume is most likely on the upward side of the:

Answer 24

left shoulder

Question 25

With regards to the Polarity principle, once a support level is breached, it becomes a:

Answer 25

Resistance level

Question 26

Money Market Yield =

Answer 26

HPY * (360/t) where t = number of days

Question 27

Which test should be used to evaluate the difference between the means of two normally distributed populations?

Answer 27

An approximate t-test An approximate t-test is used to test the differences between means of two populations when the unknown population variances cannot be assumed to be equal.

Question 28

A probability density function describes the probability of a:

Answer 28

continuous random variable

Question 29

The probability of rejecting a true null hypothesis is a:

Answer 29

Type I error

Question 30

Standard Error of the sample mean =

Answer 30

Population standard deviation (S) / Square root of the number of observations in the sample (n)

Question 31

P(AB) =

Answer 31

P(A | B) x P(B)

Question 32

Roy's Safety-First Ratio =

Answer 32

E(r) - Threshold Return / Standard Deviation

Question 33

In generating an estimate of a population parameter, a larger sample size is most likely to improve the estimator's:

Answer 33

Consistency

Question 34

Investors should be most attracted to return distributions that are:

Answer 34

Positively skewed Investors should be attracted by a positive skew (distribution skewed to the right) because the mean return falls above the median. Relative to the mean return, positive skew amounts to a limited, though frequent, downside compared with a somewhat unlimited, but less frequent, upside.