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QUANTLVL 1 FORMULAS
| Question | Answer |
|---|---|
| Annuities | series of cash flows that occur at evenly spaced intervals of time |
| ordinary annuity | cash flow at end of time period |
| annuity due | cash flow at beginning of time period |
| perpetuity | annuities with infinite lives |
| Required rate of return formula | = (1+ Real risk free rate) (1+ Inflation rate premium) ( 1+ risk premium) - 1 |
| arithmetic mean | sum of all values in sample/ # of observations |
| Geo mean on calc | 1. add or subrtract from 1 and multiply all values 2. hit Yx and put # of values 3. hit 1/x 4. solve used for compound rate of return |
| Harmonic mean on calc when used | used to calculate avg share cost : 1. add values after converting to 1/x 2. divide # of values by final value |
| Trimmed mean | exclude highest and lowest percent of observations |
| Winsorized mean | substitute values for highest and lowest percent of observations |
| Standard deviation on Calc | 1. 2nd data input values 2. 2nd stat Sx is standard deviation |
| weighted mean on calc | 1. multiply % of portfolios by return for each and add them together 2. boom |
| Variance on calc | standard deviation squared |
| Coefficient of variation formula | Standard deviation / Mean or expected value |
| Roys safety first ratio | subtract minimum desired return from expected return / standard deviation of portfolio returns |
| Correlation formula | covariance / product of two standard deviations |
| Normal distributions | 68% fall within 1SD , 90% within 1.65SD, 95% within 1.96 SD, 99% within 2.58SD |
| Z- score formula | = observation - population mean / standard deviation |
| Binomial distribution | assumes a variable can take one of two values ( success/failure) or in the case of a stock up or down. A binomial model can describe changes in the value of an asset or portfolio, it can be used to compute its expected value over several periods |
| Sampling distribution | probability distribution of all possible sample statistics computed from a set of equal size samples randomly drawn from the same population. The sampling distribution of the mean is the distribution estimates of the mean |
| Central limit theorem | When selecting simple random samples of size n from population with mean and finite variance, the sampling distribution of sample mean approaches normal probability distribution with mean and variance equal to o2/n as the sample size becomes large |
| Standard error or the sample mean | the standard deviation of the sample means |
| confidence interval formula | mean +- confidence interval + standard deviation / # of values squared 1.645 for 90%, 1.960 for 95% , 2.575 for 99% confidence |
| Null hypothesis (Ho) | Hypothesis that contains the equal sign ( =, less than equal to, greater than equal to) |
| Alternative hypothesis (Ha) | concluded if there is sufficient evidence to reject the null hypothesis |
| Difference between one and two tailed tests | one tail: Tests whether value is greater than or less than a given number two tail: tests whether value is equal to a given number |
| Type 1 and type 2 errors | Type 1: Rejection of null hypothesis when it is actually true Type 2: Failure to reject null hypothesis when it is actually false |
| time period bias | Time period bias involves inappropriate generalization of time-specific results |
| data snooping bias | Data snooping is a form of statistical bias manipulating data or analysis to artificially get statistically significant results |
| Look-ahead bias | is the phenomenon that unconsciously uses unavailable or unrevealed data in analyzing or simulating historical events |
| In a simple linear regression, the regression line minimizes the | sum of squared errors |
| For which functional form of a linear regression is the slope coefficient interpreted as the absolute change in the dependent variable for a relative change in the independent variable | log lin model |
| Assume a cartel is organized among the producers of a commodity and begins practicing collusion. The most likely effects on price and output are that | price will increase and output will decrease |
| For a positively skewed distribution, the median is greater than | the mode, but less than the mean. |
| A scatter plot is best interpreted as displaying the: | paired observations of two variables |
| nominal data is | refers to named or labeled variables that do not include numerical values |
| For a distribution with negative skewness | mean < median < mode |
| Cross-sectional data are a | sample of observations taken at a single point in time |
| A time-series is a | sample of observations taken at specific and equally spaced points in time |
| Panel data consist of a | cross-section of time series data. combination of time series and cross sectional |
| the absolute frequency describes the | number of times a particular value for a variable (data item) has been observed to occur |
| A relative frequency describes the | number of times a particular value for a variable (data item) has been observed to occur in relation to the total number of values for that variable |
| A leptokurtic distribution has ________ tails than a normal distribution. | Fatter |
| which mean do you use when you need to eliminate the outliers | winzorized mean |
| a frequency distribution is a grouping of | data into non-overlapping intervals. |
| A line chart is a graph used to | visualize ordered observations such as data series over time. |
| A frequency polygon is best suited to summarizing | a distribution of numerical data. |
| ROR formula | comparing the difference between its current value and its initial value, and then dividing the result by its initial value. |
| Discrete uniform distribution with example | A discrete uniform istribution is one that has a finite (or countably finite) number of random variables that have an equally likely chance of occurring. EX. rolling dice |
| The jackknife technique involves | calculating the standard deviation of the means from samples, each of which is calculated with a different observation removed from the original sampl |
| The bootstrap method involves | drawing multiple random samples from a dataset and calculating the standard deviation of those sample means. |
| Standard error based on the standard deviation of a single sample is estimated by | dividing the sample standard deviation by the square root of the sample size |
| variance of portfolio returns formula | S.D ^2a X Wa^2 + S.D^2a X Wb^2 + 2Wa Wb X COV ab |
| how to find find correlation coefficient from coefficient of determination | square root coefficient of determination idiot |
| A simple linear regression is a model of the relationship between | one dependent variable and one independent variable |
| The coefficient of determination for a linear regression is best described as the | percentage of the variation in the dependent variable explained by the variation of the independent variable |
| When there is a linear relationship between an independent variable and the relative change in the dependent variable, the most appropriate model for a simple regression is | the log-lin model |
Created by:
gszeremley
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