422 Index
Portfolio risk management, 9–10
Positive autocorrelation, 97
Positive process, 219
Power law, 354
Power of a test, 379–380
Predicated scores, 249
Prediction of 10-year Treasury yield, 59–65
Prediction retesting, 316–317
Predictions, 249
Price process
about, 109–110
error correction, 111–113
random walk, 110–111
S&P 500 Index returns, 111
Principal components, 252
Principal components analysis (PCA),
251–259
Principal components construction, 253–254
Probit regression model, 138–141
illustration hedge fund survival, 138–139
Procedures for mitigating, 83–84
Processes, 146–147, 259
Purchasing Power Parity Theory (Enders), 194
P-value, 378–379
Q-statistic, 173, 175–177, 181, 183
Quadratic form, 288
Qualitative and quantitative robustness, 406
Qualitative data, 322
Qualitative inputs, 116
Quality criteria, 363
Quality criteria of test
consistent test, 383
power of test, 380
unbiased test, 382–383
uniformly most powerful test, 380–382
Quantile process, 146
Quantile regressions
about, 143
applications to finance, 146–155
parameter estimation, 144–146
processes of, 146–147
regression analysis, classical limitations
of, 144
summary/key points, 155
Quantitative research process, 307–314
emotions influence, 312–313
estimations vs. prediction errors, 310–312
ex ante justification and financial
economic theory, 307–309
financial econometrics and investment
strategies, 307–314
model estimation methodology, 309–310
statistical significance vs. alpha, 313–314
survivorship biases and sample selection,
309
Quantitative variables, 322Random walk, 110–111
Random walk hypothesis testing, 317
Rank, 389, 391
Ready, Mark J., 169
Realizations, 219, 360
Rectangular matrix, 387
Regression analysis, classical limitations, 144
Regression coefficients, 3
Regression errors, standard deviation of, 80
Regression hyperplane, 44
Regression model, 14–16
Regression model assumptions, 16–18
Regression model estimates, 18–22
about, 18–20
application to stock returns, 20–22
Regression models, use of, 38
Regression models with categorical variables
about, 115
dependent categorical variables, 137–140
independent categorical variables,
116–136
summary/key points, 140–141
Regression-based duration, 51
Regressor, 15
Rejection point, 407
Rejection region, 375
Relative frequency, 323
Relative joint frequency distribution, 333
Residual, 38
Residual risk, 75
Residual term, 16
Resistance beta, 168
Resistant estimators, 406–409
about, 406–407
breakdown bound (BD), 407
gross error sensitivity, 407
local shift sensitivity, 408
rejection point, 407
Winsor’s principle, 408
Return-based style analysis for hedge funds,
69–79
Returns, conditioned on previous, 218