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Formulating and Implementing Investment Strategies Using Financial Econometrics 317 the consistent performance of the three-peri ...

318 The Basics of financial economeTrics of freedom in that estimates are made based on the estimates of previous steps. The “ri ...

Formulating and Implementing Investment Strategies Using Financial Econometrics 319 ■ (^) For backtesting proposed strategies, t ...

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321 Appendix A descriptive Statistics i n this appendix, we review descriptive statistics. In contrast to inferential statistics ...

322 The Basics of financial economeTrics The field of descriptive statistics discerns different types of data. Very generally, t ...

Descriptive Statistics 323 The set of data then form what is called time series data. In contrast, one could pick a particular t ...

324 The Basics of financial economeTrics where n is the total number of observations. With k being the number of the different v ...

Descriptive Statistics 325 tABle A.1 DJIA Stocks by Share Price in Ascending Order as of December 15, 2006 Company Share Price I ...

326 The Basics of financial economeTrics cumulative frequency distribution, this time using relative frequencies. Hence, we have ...

Descriptive Statistics 327 Moreover, whether the class bounds are elements of the classes or not must be specified. The class bo ...

328 The Basics of financial economeTrics For a more thorough analysis of this, let’s use a more formal presenta- tion. Let I den ...

Descriptive Statistics 329 population or just a sample from that population. The key numbers when dealing with populations are c ...

330 The Basics of financial economeTrics extremely to the left and half of the observations are extremely to the right of the me ...

Descriptive Statistics 331 This is of particular interest if deviations from the mean are more harmful the larger they are. In t ...

332 The Basics of financial economeTrics This is because, not only is some absolute deviation of interest, but the direc- tion i ...

Descriptive Statistics 333 all possible combinations of first and second components. The task is to set up the so-called joint f ...

334 The Basics of financial economeTrics FiGuRe A.1 Scatter Plot: Extreme 1—No Relationship of Component Variables x and y x y w ...

Descriptive Statistics 335 FiGuRe A.2 Scatter Plot: Extreme 2—Perfect Linear Relationship between Component Variables x and y x ...

336 The Basics of financial economeTrics −0.2 −0.15 −0.1 −0.05 0 0.05 0.1 0.15 −0.4 −0.3 −0.2 −0.1 0 0.1 0.2 0.3 GE S&P 500 ...