Lecture Notes 1A-Technical Review

Lecture Notes 1A-Technical Review - Lecture Notes 1A...

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Lecture Notes 1A Technical Review Probability, Statistics, and Econometrics
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Probabilities Countable and Uncountable Sum or Integrate to 1 Non-negative Random Variable: A function that maps uncertain outcomes into values (real or complex). In finance, we focus on monetary returns or rates of return.
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Measures of Central Tendency Median (50 th percentile) Mode (Most frequent outcome) Mean (Arithmetic Average) Expected Value (Probability weighted averaged of possible outcomes) – 1 st moment Discrete case: Ex i x i x P i = ) ( )) ( (
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Central Tendency - 2 Continuous case: = Ex xdx x f ) (
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Measures of Dispersion Range Variance (2 nd moment): Standard Deviation: Coefficient of Variation: CV = σ/Ex Skewness (3 rd moment): E[x(i) – Ex] 3 ) ( ] ) ( ))[ ( ( 2 2 x Ex i x i x P i σ = -
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Multivariate Statistics Measures of Association Cov(x,y) = E{[x – Ex] [y – Ey]}
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This note was uploaded on 09/27/2010 for the course BUSINESS 6F:111 taught by Professor Tongyao during the Spring '09 term at University of Iowa.

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Lecture Notes 1A-Technical Review - Lecture Notes 1A...

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