Sampling Errors
What are Sampling Errors? Sampling errors are statistical errors that arise when a sample does not represent the whole population. They are the difference between the real values of the population and the values derived by using samples from the population. Sampling errors occur when numerical parameters of an entire population are derived from a...
Skewness
What is Skewness? Skewness is a measure of asymmetry or distortion of symmetric distribution. It measures the deviation of the given distribution of a random variable from a symmetric distribution, such as normal distribution. A normal distribution is without any skewness, as it is symmetrical on both sides. Hence, a curve is regarded as skewed...
Exponential Growth
What is Exponential Growth? Exponential growth is when data rises over a period of time, creating an upwards trending curve on a graph. In mathematics, when the function includes a power (or an exponent), the calculation would be increasing exponentially. For example, if hens lay eggs three times per year and triples every year, then...
Statistical Significance
What is Statistical Significance? Statistical significance is the claim that the results or observations from an experiment are due to an underlying cause, rather than chance. Researchers conduct hypothesis testing to determine statistical significance. Financial analysts often analyze their models to determine if a change in actions will make a statistically significant difference. For example,...
Mutually Exclusive
What is Mutually Exclusive? Mutually exclusive is used to describe when two or more respective outcomes cannot occur simultaneously. If one of the results is chosen, all the other possible outcomes cannot be true at the same time. The most basic and commonly used example is a coin toss. With every toss of a coin,...
Serial Correlation
What is Serial Correlation? Serial correlation is a statistical term used to describe the relationship – specifically, the correlation – between the current value of a variable and a lagged value of the same variable from earlier time periods. Serial correlation, also referred to as autocorrelation, is often used by financial analysts to predict future...
K-Ratio
What is the K-Ratio? The K-Ratio is a statistical tool that helps us measure two things – the growth of return and the consistency of that growth over a specified period. It is often used to determine the risk vs. reward of investing in a particular asset, as well as the consistency of the return...
Durbin Watson Statistic
What is the Durbin Watson Statistic? The Durbin Watson statistic is a test statistic to detect autocorrelation in the residuals from a regression analysis. It is named after professor James Durbin, a British statistician and econometrician, and Geoffrey Stuart Watson, an Australian statistician. What is Autocorrelation? Serial correlation, also called autocorrelation, refers to the degree...
Variability
What is Variability? Variability is a term used to describe how much data points in any statistical distribution differ from each other and from their mean value. The statistical tools used to measure variability are range, standard deviation, and variance. It is a useful metric in finance when applied to measure the variability of investment...
Degrees of Freedom
What are Degrees of Freedom? The term “degrees of freedom” (often abbreviated as “d.f.” or “df”) describes the freedom for values, or variables, to vary. Put differently, a lower degrees of freedom means that there are more constraints to the variables. History of Degrees of Freedom The conceptual application of the degrees of freedom was...
