Linear Regression with One Regressor

After completing this reading you should be able to: Explain how regression analysis in econometrics measures the relationship between dependent and independent variables. Interpret a population regression function, regression coefficients, parameters, slope, intercept, and the error term. Interpret a sample…

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Hypothesis Testing and Confidence Intervals

After completing this reading, you should be able to: Calculate and interpret the sample mean and sample variance. Construct and interpret a confidence interval. Construct an appropriate null and alternative hypothesis, and calculate an appropriate test statistic. Differentiate between a…

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Bayesian Analysis

After completing this reading you should be able to: Describe Bayes’ theorem and apply this theorem in the calculation of conditional probabilities. Compare the Bayesian approach to the frequentist approach. Apply Bayes’ theorem to scenarios with more than two possible…

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Distributions

After completing this reading, you should be able to: Distinguish the key properties among the following distributions: uniform distribution, Bernoulli distribution, Binomial distribution, Poisson distribution, normal distribution, lognormal distribution, Chi-squared distribution, Student’s t, and F-distributions, and identify common occurrences of…

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Performing Due Diligence on Specific Managers and Funds

In this chapter, we will first apply the term due diligence to explain the evaluation and analysis processes followed by an investor or plan sponsor to evaluate a manager. Afterward, we will look at the due diligence process, which is…

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Risk Monitoring and Performance Measurement

A risk is a form of uncertainty that represents the ‘shadow price’ behind expected profits. The presence of the cost-benefit process is assured in the event that someone is willing to incur losses just to generate profits. For a return…

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VaR and Risk Budgeting in Investment Management

This chapter focuses on risk budgeting in the investment management industry, a practice that is somewhat new. The learner will be asked to identify the investment process and understand policy mix risk and active management risk. Funding risk and sponsor…

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Basic Statistics

After completing this reading, you should be able to: Interpret and apply the mean, standard deviation, and variance of a random variable. Calculate the mean, standard deviation, and variance of a discrete random variable. Interpret and calculate the expected value…

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Probabilities

After completing this reading, you should be able to: Describe and distinguish between continuous and discrete random variables. Define and distinguish between the probability density function, the cumulative distribution function, and the inverse cumulative distribution function. Calculate the probability of…

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External and Internal Ratings

Candidate’s Objectives: After completing this reading you should be able to: Describe external rating scales, the rating process, and the link between ratings and default. Describe the impact of time horizon, economic cycle, industry, and geography on external ratings. Explain…

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