Durbin Watson Test. How do you use Excel to calculate Durbin-Watson? Durbin-Watson is a statistic that is used to test for autocorrelation in data. It is used in regression analysis to help determine whether or not there is a relationship between the independent and dependent variables. The Durbin-Watson statistic ranges from 0 to 4. A … Read more
Binomial Distribution: Definition, Formula, Analysis, and Example What is binomial distribution and mention its formula? A binomial distribution is a type of probability distribution in which there are only two possible outcomes. The formula for a binomial distribution is: P(x) = (n choose x) * p^x * (1-p)^(n-x) where: n = the number of trials … Read more
. The Law of Large Numbers: What It Is, How It’s Used, Examples What is the strong law of large numbers? The strong law of large numbers is a theorem in probability theory that states that, given a sequence of independent and identically distributed random variables, the sample mean of those variables converges to the … Read more
Empirical Rule: Definition, Formula, Example The empirical rule is a statistical rule that states that for a normal distribution, the mean, median, and mode will all fall within one standard deviation of each other. Additionally, 68% of the data will fall within one standard deviation of the mean, 95% of the data will fall within … Read more
Marginal benefit is the additional benefit that a person receives from consuming one more unit of a good or service. In other words, it is the extra satisfaction that a person gets from consuming an additional unit of a good or service. The marginal benefit of a good or service diminishes as a person consumes … Read more
The SMB (Small Minus Big) factor is a risk factor that captures the return difference between small-cap stocks and large-cap stocks. The SMB factor is often used as a proxy for the market risk premium, as small-cap stocks are generally considered to be more volatile and risky than large-cap stocks. The SMB factor has been … Read more
Barra risk factor analysis is a statistical technique used to identify and quantify the risks associated with investments. The technique is based on the premise that the prices of securities are determined by a variety of factors, including economic, political, and market conditions. The Barra risk model consists of two components: a factor model and … Read more
Subjective probability is a type of probability that is based on an individual’s personal judgment or opinion. This type of probability is not based on any scientific or mathematical calculation, but rather on the individual’s own personal beliefs or feelings about a particular event occurring. Subjective probability is often used in situations where there is … Read more
The term “ex-post” refers to a situation where events have already occurred and are therefore known. In financial analysis, ex-post refers to an investment’s actual return, as opposed to its expected return. An investment’s ex-post return is useful in assessing whether the investment performed better or worse than expected. What is ex-post measure? Ex-post measure … Read more
