&auml;&cedil;‰ Investment Tools Quantitative Methods

# &auml;&cedil;‰ Investment Tools Quantitative...

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f: State the central limit theorem and describe its importance. The central limit theorem tells us that for a population with a mean µ and a finite variance σ 2 , the sampling distribution of the sample means of all possible samples of size n will be approximately normally distributed with a mean equal to µ and a variance equal to σ 2 /n. The central limit theorem is extremely useful because the normal distribution is relatively easy to work with when doing hypothesis testing and forming confidence intervals. We can make very specific inferences about the population mean, using the sample mean, no matter the distribution of the population, as long as the sample size is "large." What you need to know for the exam: 1.
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