Anon

Index 421

Multiple linear regression
about, 41
applications to finance, 51–79
assumptions of, 43
diagnostic check and model significance,
46–51
model, 42–43
model design, 45–46
model parameter estimates, 43–45
summary/key points, 79–80
Multiple linear regression model, building
and testing
assumptions testing of multiple linear
regression model, 88–100
model building techniques, 84–88
multicollinearity problem, 81–84
summary/key points, 100–102
Multiplication, 393–395
defined, 394–395
Multivariate extensions, 230–231
Multivariate variables and distributions,
332–342
conditional distribution, 336–337
contingency coefficient, 341–342
correlation, 340–341
covariance, 338–340
frequencies, 332–333
graphical representation, 333–336
independence, 337–338
marginal distributions, 333
Mutual fund characteristic line, 25–26

N-dimensional vector, 385
Negative autocorrelation, 97
Ng, Serena, 263
Noise, 4, 17, 294, 299, 301–303. See also
White noise
Nonlinear regression, 91
Nonlinear relationship, 36–38
Nonparametical properties, 405
Nonstationary variables, 194
Nonsystemic risk, 75
Normal distribution, 18
about, 344–345
properties of, 345–347
Normal distribution tests for residuals
about, 92–93
autocorrelation of the residuals absence,
96–100
chi-square statistic, 93

constant variance of the error term

(homoschedasticty) tests, 95–96

Jarque-Bera test statistic, 93–94

standardized residual analysis, 94

Null hypotheses, 373

Observed variables, 241

Onatsky, Alexei, 263

One-tailed test, 373

Open classes, 327

Operation, 391

Ordinary least squares (OLS) methodology,

19–20, 79, 268, 273–276

Orthogonal factors, 243

Orthogonal matrix, 396

Orthogonal vectors, 393

Overfitting, 294

Parameter estimation, 144–146

Parameter space, 359

Parameters vs. statistics, 328–329

Pareto tail, 354

Partial autocorrelation (PAC), 173

Passive portfolio strategy, 8

Pearson contingency coefficient, 342

Pearson correlation coefficient, 341

Pearson skewness, 331

Penalty function, 294

Perfect hedge, 30

Phillips-Perron statistic, 197

Phillips-Perron test, 197, 202

Physics and economics, 291–293

Pohlman, Larry, 148

Point estimators

estimators, 361–362

estimators, quality criteria of, 363–365

large-sample criteria, 365–369

linear estimators, 362–363

sample, 360

sample, statistic and estimator, 359–363

sampling technique, 360–361

statistic, 361

Policy asset allocation, 7

Polytomous variable, 119, 141

Population parameter, 361

Portfolio beta, 26

Portfolio construction, 8–9

Portfolio manager style determination,

149–151

Portfolio risk, 9, 11