Basic Statistical Concepts for Investment
Table of Contents
- Introduction
- Descriptive Statistics
- Probability Theory
- Inferential Statistics
- Hypothesis Testing and Confidence Intervals
- Summary
Introduction
Welcome to the second course in our series on quantitative finance and investment. In this course, we will introduce the basic statistical concepts that are crucial for investment analysis.
Descriptive Statistics
Descriptive statistics are used to summarize and describe the main features of a collection of data. Key concepts include measures of central tendency (mean, median, mode), measures of variability (range, variance, standard deviation), and measures of relationship (correlation, covariance).
Probability Theory
Probability theory is the branch of mathematics concerned with probability, the analysis of random phenomena. It is essential for understanding risk and uncertainty in investment. Key concepts include probability distributions (such as normal, log-normal, binomial), expected value, and standard deviation.
Inferential Statistics
Inferential statistics are techniques that allow us to use samples to make generalizations about the populations from which the samples were drawn. This is fundamental to making predictions or forecasts in finance. Key concepts include sampling distribution, central limit theorem, and regression analysis.
Hypothesis Testing and Confidence Intervals
Hypothesis testing is a statistical method that is used in making statistical decisions using experimental data. Confidence Intervals estimate the range in which a population parameter will fall given a specific level of confidence. These are important tools for evaluating and comparing investment strategies.
Summary
This course provided an introduction to the basic statistical concepts used in investment analysis. We covered descriptive statistics, probability theory, inferential statistics, and hypothesis testing. As we progress through this series, we’ll delve deeper into these topics and learn how to apply these concepts in the context of finance and investment.
Stay tuned for our next course: Understanding Financial Markets!