Introduction to risk, return and the historical record
3 important questions on Introduction to risk, return and the historical record
What is the degree of freedom bias and how can it be eliminated?
The variance estimate from from the estimate variance is biased downward, however. The reason is that we have taken deviations from the sample arithmetic average, r, instead of the unknown, true expected value, E(r), and so have introduced a bit of estimation error. This is sometimes called a degrees of freedom bias. We can eliminate the bias by multiplying the arithmetic average of squared deviations by the factor n/(n - 1).
What is the sharpe ratio?
We measure the attraction of an invest- ment portfolio by the ratio of its risk premium to the SD of its excess returns. Which is; (risk premium) / (SD of excess return)
What is value at risk?
The value at risk is the measure of loss most frequently associated with extreme negative returns. VaR may be viewed as the best rate of return out of the best 5% worst-case scenarios.
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
Remember faster, study better. Scientifically proven.
