University of Bristol - School of Economics, Finance and Management QUANTITATIVE METHODS FOR FINANCE AND INVESTMENT (EFIMM005) Review Questions Question 1: Concepts a. Deﬁne a stochastic process. Give an example in Finance of a quantity that can be modelled as a stochastic process. b. Deﬁne a stationary stochastic process. c. Consider a stochastic process {Yt , t = 1, .., T }. Deﬁne the partial autocorrelation function (pacf) associated to this process. d. Explain the diﬀerence between estimator and estimate. e. Let {Ut , t = 1, .., T } be a mean zero white noise process. What is the value of pacf at lag 2 for the process Yt = .5Yt−1 + Ut ? f. Explain the diﬀerence between the autocovariance function and the sample autocovariance function.

Question 2: Application The capital asset pricing model (CAPM) can be written as E(Rjt |Rmt , Rf t ) = Rf t + βj (Rmt − Rf t ), where Rjt is the net return of security j at period t, Rmt is the return on a market portfolio proxy, and Rf t is the return on a risk-free proxy. The coeﬃcient βj is the CAPM beta for security j. Suppose that you have estimated βj by ordinary least squares and found that the estimated value was 1.37 with standard deviation 2.6. based on 3665 observations. a. A city analyst has told you that security j closely follows the market, in the sense that security j is equally risky, on average, to the market portfolio. Perform a 5% signiﬁcance level test of hypothesis to determine whether data support the analysts claim. b. Are hypotheses tested concerning the value of βj or its estimated values?

Question 3: Techniques Consider the moving average process: Yt = εt + θ1 εt−1 + θ12 εt−12 with {εt }T a mean zero white noise process with variance σ 2 > 0. t=0 a. Calculate the mean of Yt . b. Calculate the variance of Yt . c. Calculate the autocovariance function of {Yt }T . t=a T =120 d. Assume that {yt }t=1 represents the monthly tons of ice cream sold in the UK between Oct. 2001 and Oct. 2012. What type of...

...Quantitative Research MethodsQuantitative means quantity which implies that there is something that can be counted. Quantitative research has been defined in many ways. It is the kind of research that involves the tallying, manipulation or systematic aggregation of quantities of data (Henning, 1986)
John W. Creswell defined quantitative research as an inquiry into a social or human problem based on testing a theory...

...
Quantitative Research
Research Methods in Criminal Justice and Security
Professor Beshears
27 February 2014
Quantitative research collects numerical data through surveys, questionnaires, and polls. Quantitative research main purpose is to find the relationship between two variables. According to Babbie (2010) a descriptive study establishes only associations between variables while experimental defines the...

...Review Test Submission: Midterm Exam
SKIP TO COURSE MENU SKIP TO TOP FRAME TABS
Content
User
Course
QuantitativeMethods
Test
Midterm Exam
Started
2/5/14 10:13 PM
Submitted
2/6/14 2:13 AM
Status
Completed
Attempt Score
120 out of 200 points
Time Elapsed
4 hours, 0 minute out of 4 hours.
Instructions
Question 1
5 out of 5 points
Deterministic techniques assume that no uncertainty exists in model parameters.
Answer...

...trading-software-collection.com
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Frequently Asked Questions
In
QuantitativeFinance
Frequently Asked Questions
In
QuantitativeFinance
Including key models, important formulæ,
common contracts, a history of quantitativeﬁnance, sundry lists, brainteasers and more
www.wilmott.com...

...CAPM
Rational investors expect returns as a reward for taking risk. Returns are usually expressed as a performance number- either as a $ return or as a percentage.
Therefore we need to be able to measure the level of risk inherent in a potential investment, and we also need to be able to calculate the expected return for that risk.
Risk is not achieving the return that is expected
We measure risk by calculating variance and standard deviation – these show the volatility of...

...1. How you would use the concept of probabilities to apply to profiles for hiring more satisfied individuals and
2. Other ways that probability is used in business (Use the Business Source Elite Database in the Cybrary, research how probability is used in business).
Begin your email to AIU by first providing an overview of the database, i.e., a story.
Include the following pieces of information.
Part I
a) What is the gender distribution (%females and %males)?
Solution. From the...

...Principles of QuantitativeMethods
2011
Table of Contents
Question 1 – Difference between Simple Interest and Compound Interest 3
1.0 Simple Interest 3
1.1Compound Interest 4
Question 2 – Difference between Depreciation by Straight Line Method and Depreciation by Reducing Balance Method 6
2.0 The Difference 6
Question 3 - Standard Deviation and Quartile Deviation 7
Standard Deviation 7
Quartile Deviation 8
3.0 Purpose of...

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Investment Trusts Trading At Discount
TOPIC # 3
Introduction
According to Cheng et al. (1994, p.813), ‘an investment trust company (ITC) is a UK public limited company, the business of which consists of investing its funds mainly in securities, with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds.’ In the UK, investment trusts started to form...

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