418 Index
Generalized autoregressive conditional
heteroscedasticity model, 224
Generalized central limit theory, 357, 363
Generalized least squares (GLS) estimator,
278
Generalized least squares method, 278
Generalized method of moments, 285–289
Generalized method of moments (GMM),
285–286
Goodness-of-fit measure (R^2 ), 13, 26, 46
adjusted, 49
Goodness-of-fit measure (R^2 ) of model,
22–24
determination and correlation coefficient,
54
Goodness-of-fit of model, 22–24
about, 22–24
coefficient of determination and
correlation coefficient, 54
Gowland, Chris, 148
Granger, Clive, 189, 197, 205
Graphical representation, 333–336
Gross error sensitivity, 407
Gurkaynak, Refet, 196
Hat matrix, 159, 170
Heavy tails, 343
Heavy-tailed distribution, 94
Hedge ratio, 32–36
Hedging, 26
Heteroskedastic nature, 92
Hidden variables, 237
High-frequency financial data, 2
Holdout sample, 186
Homogeneous system, 390
Homoskedastic nature, 92
Homoskedastic time series, 218
Homoskedastic variables, 217
Huber, Peter J., 159, 167, 405
Huber function, 161
Hull, John, 230
Hypotheses, 372–375
decision rule, 374
error types, 375–376
setting up, 373
Hypothesis testing, 372
hypotheses, 372–375
p-value, 378–379
quality criteria of test, 380–383
test size, 376–378
Identical behavior, 109
Illustration hedge fund survival, 138–139
Illustration of robust statistics, 410–412
Illustration predicting corporate bond yield
spreads, 120–132
Illustration testing the mutual fund
characteristic lines in different market
environments, 132–136
Illustrations robustness of the corporate
bond yield spread model, 161–166
Inconsistent system, 390
Independence, 337–338
Independent and identical distribution (i.i.d.), 17
Independent behavior, 109
Independent categorical variables
about, 116–119
statistical tests, 119–136
Independent risk control, 317–318
Independent variables, 14–16
Index fund, 9
Inductive statistics, 266
Inference, 360
Inferential statistics, 266
confidence intervals, 369–372
hypothesis testing, 372–383
point estimators, 359–369
Infinite market, 243
Influence curve (IC), 407
Influence function, 407
Information criteria, 173–176
Inner product, 393
Innovation, 113
In-sample estimation period, 186
Instrumental variables (IV), 283–284
Integrated order one, 196
Interruptible range, 410
Inverse, 395
Inverse and adjoint, 395–396
Investment management applications
about, 6–7
asset allocation, 7–8
portfolio construction, 8–9
portfolio risk management, 9–10
Investment strategy process
about, 314
expected returns model, 315
independent risk control, 317–318
largest value added, 315–316
prediction retesting, 316–317
random walk hypothesis testing, 317