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.
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 ) (
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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