L15-09 - The UNIVERSITY of NORTH CAROLINA at CHAPEL HILL...

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10/27/09 Lecture 15 1 STOR 155 Introductory Statistics Lecture 15: Sampling Distributions for Sample Means The UNIVERSITY of NORTH CAROLINA at CHAPEL HILL
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10/27/09 Lecture 15 2 Review • Sampling distribution for a sample count: – Binomial experiments – Binomial distribution – Normal approximation – Continuity correction • Sampling distribution for a sample proportion: – Exact calculation via binomial distribution – Normal approximation No continuity correction • How about a sample mean?
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10/27/09 Lecture 15 3 Diversification • A basic principle of investment is that diversification reduces risk. • That is, buying several securities, (for example stocks), rather than just one, reduces the variability of the return on an investment. • The following figures show two distributions of returns in 1987.
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10/27/09 Lecture 15 4 Distribution of returns for all 1815 stocks on the NYSE for the entire year 1987. The mean return was –3.5% and the distribution shows a very wide spread.
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10/27/09 Lecture 15 5 Distribution of returns for all possible
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L15-09 - The UNIVERSITY of NORTH CAROLINA at CHAPEL HILL...

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