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L1 07 Statistical Concepts and Market Returns > C > Flashcards

Flashcards in C Deck (3):
1

Calc, interpret relative frequencies, given a frequency distribution

Relative frequency: The absolute frequency (frequency: Qobservations in an interval) of each interval divided by the total number of observations

"Three-fourths of the observations fall in one of three intervals: 6.0 to 7.0 percent, 7.0 to 8.0 percent, or 9.0 to 10.0 percent."

Calc: Mode Abs. Freq / total obs, or rather Sum %relative Freq. of most common intervals! (to denote where most observations lie)

"The change in the cumulative relative frequency as we move from one interval to the next is the next interval’s relative frequency."

2

Calc, interpret cumulative frequencies, given a frequency distribution

Cumulative frequency - The sum of relative frequencies as we move from first to last interval

interpretations: 1) Tells us the fraction of observations that are less than the upper limit of each interval and 2) tells us the number of observations that are less than the upper limit of each return interval

"in the last column, we see that the interval −2 percent to 0 percent shows a cumulative frequency of 38.42 percent, for an upper return limit of 0 percent. This means that 38.42 percent of the observations lie below the level of 0 percent. "

Calc: Cumulative Absolute # / Total # abs. freq.

Calc at just before the upper limit of 'most average real equity returns...' aka, only n% of returns reside below the average

" The cumulative frequency distribution allows us to see how many or what percent of the observations lie below a certain value. "

3

Frequency Distribution groups data into a set of 'intervals';....

classes, ranges, bins

Intervals - A set of values within which an observation falls

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