Coefficient of Variation
What is the Coefficient of Variation? The coefficient of variation (relative standard deviation) is a statistical measure of the dispersion of data points around the mean. The metric is commonly used to compare the data dispersion between distinct series of data. Unlike the standard deviation, which must always be considered in the context of the mean...
Mode
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...
R-Squared
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....
Time Period Bias
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...
Survivorship Bias
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...
Sum of Squares
What is Sum of Squares? Sum of squares (SS) is a statistical tool that is used to identify the dispersion of data as well as how well the data can fit the model in regression analysis. The sum of squares got its name because it is calculated by finding the sum of the squared differences....
Random Variable
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...
Central Limit Theorem
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...
Statistics
What is Statistics? Statistics is a term derived from the Latin word “status,” which means a group of figures used to represent information about a human interest. It refers to the technique developed to collect, review, analyze, and draw conclusions from quantified data. The data obtained is then used in the decision-making process. Financial analysts...
Kurtosis
What is Kurtosis? Kurtosis is a statistical measure that defines how heavily the tails of a distribution differ from the tails of a normal distribution. In other words, kurtosis identifies whether the tails of a given distribution contain extreme values. Along with skewness, kurtosis is an important descriptive statistic of data distribution. However, the two...
