What is Mode? Mode is the most frequently occurring value in a dataset. Along with mean and median, mode is a statistical measure of central tendency in a dataset. Unlike the other measures of central tendency that are unique to a particular dataset, there may be several modes in a dataset. Corporate Finance Institute reviews…
What is Social Mobility? Social mobility refers to the shift in an individual’s social status from one status to another. The shift can either be higher, lower, inter-generational, or intra-generational, and it cannot necessarily be determined if the change is for good or bad. Origin of the Social Mobility Concept Russian-born American sociologist and political…
What is R-Squared? R-Squared (R² or the coefficient of determination) is a statistical measure in a regression model that determines the proportion of variance in the dependent variable that can be explained by the independent variable. In other words, R-squared shows how well the data fit the regression model (the goodness of fit). Figure 1….
What does Pro Forma Mean? Pro forma is Latin for “as a matter of” or “for the sake of form.” It is used primarily in reference to the presentation of information in a formal way, assuming or forecasting pieces of information that may be unavailable. In most cases, pro forma documentation is used to present…
What is Time Period Bias? Time period bias is a sampling error caused by selecting observations that only cover a certain time period (i.e., a certain set of circumstances or factors). Time period bias may lead to inaccurate results since the conclusions obtained from using a sample suffering from the bias may be uniquely specific…
What is Survivorship Bias? Survivorship bias is a type of sample selection bias that occurs when a data set only considers “surviving” or existing observations and fails to consider observations that already ceased to exist. In finance, an example of survivorship bias is when studies on mutual fund returns only use databases that contain data…
What is Consignment? Before understanding the difference between consignor vs. consignee, it’s important to understand what consignment is. Consignment is the process by which a person gives over something to the care of another party, retaining full ownership until the property is sold. It is often done during auctions, shipping, transferring goods, or any time…
What is a Random Variable? A random variable (stochastic variable) is a type of variable in statistics whose possible values depend on the outcomes of a certain random phenomenon. Since a random variable can take on different values, it is commonly labeled with a letter (e.g., variable “X”). Each variable possesses a specific probability distribution function…
What is the Central Limit Theorem (CLT)? The Central Limit Theorem (CLT) is a statistical concept that states that the sample mean distribution of a random variable will assume a near-normal or normal distribution if the sample size is large enough. In simple terms, the theorem states that the sampling distribution of the mean approaches…
