Dispersion
What is Dispersion? Dispersion is a term that describes the spread of values against a specific variable. Dispersion can be measured through: Range Variance Standard deviation Within the realm of finance, dispersion is used to determine the potential returns on an investment, as well as the inherent risk of a portfolio of investments. Thus, it...
Decoupling
What is Decoupling? Decoupling represents the creation of gaps. In finance, decoupling happens when different asset classes or markets that typically demonstrate positive correlations start to move in opposite directions. In organizational studies, decoupling takes place when there are gaps between formal policies and actual practices in an organization. Eco-economic decoupling considers the environmental impacts...
Standard Error
What is Standard Error? Standard error is a mathematical tool used in statistics to measure variability. It enables one to arrive at an estimation of what the standard deviation of a given sample is. It is commonly known by its abbreviated form – SE. Standard error is used to estimate the efficiency, accuracy, and consistency...
Null Hypothesis
What is the Null Hypothesis? The null hypothesis states that there is no relationship between two population parameters, i.e., an independent variable and a dependent variable. If the hypothesis shows a relationship between the two parameters, the outcome could be due to an experimental or sampling error. However, if the null hypothesis returns false, there...
Machine Learning (in Finance)
What is Machine Learning (in Finance)? Machine learning in finance is now considered a key aspect of several financial services and applications, including managing assets, evaluating levels of risk, calculating credit scores, and even approving loans. Machine learning is a subset of data science that provides the ability to learn and improve from experience without...
Big Data in Finance
What is Big Data in Finance? Big data in finance refers to large, diverse (structured and unstructured) and complex sets of data that can be used to provide solutions to long-standing business challenges for financial services and banking companies around the world. The term is no longer just confined to the realm of technology but...
Multi-Factor Model
What is a Multi-Factor Model? A multi-factor model is a combination of various elements or factors that are correlated with asset returns. The model uses said factors to explain market equilibrium and asset prices. In multi-factor models, different factors are associated with certain characteristics (such as risk), and it helps determine the weight or importance...
Multicollinearity
What is Multicollinearity? Multicollinearity is a term used in data analytics that describes the occurrence of two exploratory variables in a linear regression model that is found to be correlated through adequate analysis and a predetermined degree of accuracy. The variables are independent and are found to be correlated in some regard. Multicollinearity is studied...
Discrete Distribution
What is Discrete Distribution? A discrete distribution is a distribution of data in statistics that has discrete values. Discrete values are countable, finite, non-negative integers, such as 1, 10, 15, etc. Understanding Discrete Distributions The two types of distributions are: Discrete distributions Continuous distributions A discrete distribution, as mentioned earlier, is a distribution of values...
Autoregressive Integrated Moving Average (ARIMA)
What is the Autoregressive Integrated Moving Average (ARIMA)? The Autoregressive Integrated Moving Average (ARIMA) model uses time-series data and statistical analysis to interpret the data and make future predictions. The ARIMA model aims to explain data by using time series data on its past values and uses linear regression to make predictions. Understanding the ARIMA...
