E4702. Statistical Inference for Financial Engineering. Professor S. Kou. Midterm, August 12, 2009. 11am-1:30pm. Closed Book Exam . Total 40 pts. 1. (5 pts) Basic Facts (a) (1 pt) Which stock exchange was the world²s third largest stock exchange in 1900? (b) (2 pts) Assume that we have two population A and B. Suppose we draw independent samples X 1 , ..., X n 1 from population A and independent samples Y 1 , ..., Y n 2 from pop-ulation B. We further assume that A and B are independent and n 1 and n 2 are large enough. Construct a 95% c.i. for the di/erence 1 2 , where 1 and 2 are population means for A and B, respectively. (c) (2 pts) Show that the mean square error of an estimator is the sum of variance of the estimator and the squared bias of the estimator. 2. (6 pts) We have two fund managers A and B. Suppose that manager A is a much better stock picker than manager B, in every categories. More precisely, A chose OSX-H and SOXX-H,
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