The confidence interval shows you an interval within which the actual (presumed but unknown) mean of a population lies within a specified probability of 1-Alpha. (Alpha is the risk of making a wrong decision eg. 1% in case of a 99% confidence interval) You can define different confidence intervals ( eg. a confidence interval of 90% or 99%)If we find […]
Example: Calculating the median and mode for returns of an EM fund.
The square root: you ask yourself, which number has been multiplied with itself that for example 4 (or any other value) is the result? So you have 4 Which number mulitpled x * x results in the value 4? As you can imagine 2*2 = 4, so the solution is 2 -> The square root of 4 is 2 Example […]
As one would probably expect, the standard normal distribution is standardized. When working with distributions, one usually looks for intervals within which a value lies. E.g., One is asking: With which probability a value y lies between y1 <y < y2 ? Standard normal distribution is the best way to calculate such a probability. First, you standardize your y values […]
Quantitative Easing refers to an expansionary monetary policy of the European Central Bank – ECB (or another Central Bank). Usually, the ECB buys bonds. Therefore, the amount of money in the economy gets larger, and bond prices rise. As the amount of money becomes higher, the interest rates get lower. The lower interest rates (in theory) lead to greater consumption […]
Formula Portfolio return: the return of asset 1 * weights of asset 1 + the return of asset 2 * weight of asset 2 …. and so on
Correlation The correlation coefficient shows you the linear relationship (and also the strength of this relationship) between two variables (eg. observations). It can take a value within the range of -1 and +1. Therefore correlation is standardized. + 1 suggests a strong positive relationship and -1 suggests a strong negative relationship. So if it is +1 one it means if […]