Reading 9: Parametric and Non-Parametric Tests of Independence

Book 1: Quantitative Methods

Correlation

measures the strength of the relationship between two variables

When the sample correlation coefficient = 0, does that always mean its equal to 0? How do we check?

No, there could be standard error. Need to do a hypothesis test.

Spearman Rank Correlation Test

a nonparametric test, it tests whether two sets of ranks are correlated

What happens if there’s a tie between two ranks?

You take the average:

if second and third rank values are equal…
(2+3)/2 = 2.5

Contingency Table

shows the number of observations from a sample that have a combination of two characteristics

What are the two characteristics in a Contingency Table for Categorical Data?

earnings growth (row)

dividend yield (column)