Quantitative Analysis in Finance is the use of mathematics and statistics to model, measure, and research the behavior of financial metrics and assets.
The geometric average monthly return tells you the average monthly return of an investment, assuming you reinvest the profits every month. Meaning, it takes into account the compounding effect. You calculate it by multiplying all the month’s growth factors together…
Strict exogeneity is one of the assumptions supporting the Ordinary Least Squares (OLS) method in regression analysis. It states that the explanatory variables are not correlated with the error term of the model. This guarantees the estimated coefficients are unbiased,…
Imperfect multicollinearity occurs when two or more explanatory variables in a statistical model are correlated with each other, but not perfectly. That’s the gist of it. To get a full explanation of imperfect multicollinearity, keep reading: #1) Imperfect Multicollinearity Definition…
Time series data is data collected at regular intervals over time. On the other hand, cross-sectional data is a snapshot of a group of things or people at the same point in time. For example, a time series dataset of…
One of the main goals of science is to investigate the relationship between different things, so we can predict their future evolution and better understand our reality. The relationship between education level and income. Math exam results and hours studied.…
This is an introduction to Statistical Inference, and its most useful tool—Hypothesis Testing. We’ll start off with an overview of the field of Statistics this tool belongs to, as well as the basic concepts we need in order to understand…