Notes 1 - Basic Statistics

# Notes 1 - Basic Statistics - Calculus y=f(x y=x is the...

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P=2 - 12 Q P’ = - 12 This is the derivative and it tell us the slope of the line P Slope = - 12 Q 4 2 y f’ = 1x this is the slope of the line (it varies because slope isn’t constant) f’ = 1x 2 this tells us what direct the function is going in x To Optimize a Function: 1. Take the derivative 2. Set it equal to 0 and solve for x 3. Take the second derivative If f’’<0 – we have a maximum If f’’ >0 – we have a minimum If f’’ = 0 – we have an inflection X= 1 4 Expected Return is essentially the mean of the past results, which is the most likely next occurrence riance tells us how far the observed values are from the mean, over all of our observations added together and then divided T. This is in squ andard deviation just gets rid of the squared returns to tell us how the observations varied from the mean on average. OR We subtract 1 to account for errors OR Covariance tells how things move together Positive: move together Negative: don’t move together *If you take the covariance of a security against itself, you get the variance!

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