Inference Questions from Homework

The mean computed for monthly returns is a

a. statistics

b. parameter

c. population

d. sample

statistic

The true expected monthly return is

a. statistics

b. parameter

c. population

d. sample

parameter

Standard Error of the Mean

measures how the sample mean would vary from one sample to another (the precision of the estimate)

Central Limit Theory

for a large enough sample, the sampling distribution of the sample mean is approx normal even when the underlying variable is not normally distributed

Holding the std dev fixed, cutting the margin of error of a confidence interval in half requires

four times as many observations

Why are confidence intervals for a mean return built with the t distribution rather than the standard normal?

Population std dev is unknown & must be estimated with s, which adds uncertainty

P-value of a Hypothesis Test

Probability of observing a test statistic at least as the one you got, assuming the null hypothesis is true

How do you decrease Type 1 Error, but increase Type 2 Error?

By lowering your alpha/significance level