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Question 1 of 10
1. Question
Why are stock returns not normally distributed? Choose the best statement that describes the logic behind this case.
Correct
No, because we cannot have a return lower than –100%, but we can have returns greater than 100%. However, returns come much closer to being normally distributed than do stock prices.
Incorrect
No, because we cannot have a return lower than –100%, but we can have returns greater than 100%. However, returns come much closer to being normally distributed than do stock prices.
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Question 2 of 10
2. Question
What happens to the size of the histogram if the size of the buckets will increase in number?
Correct
The size of the buckets will affect the appearance; too few will clump all together, while too many will create a very flat histogram.
Incorrect
The size of the buckets will affect the appearance; too few will clump all together, while too many will create a very flat histogram.
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Question 3 of 10
3. Question
What is the name given to the process if we take the change in the logarithm of the prices?
Correct
Regardless of the probability of returning less than -100 percent, stock returns can not theoretically be assumed to obey a normal distribution exactly. But what if we consider the increase in price logarithm (or log)? Those are known as log-returns.
Incorrect
Regardless of the probability of returning less than -100 percent, stock returns can not theoretically be assumed to obey a normal distribution exactly. But what if we consider the increase in price logarithm (or log)? Those are known as log-returns.
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Question 4 of 10
4. Question
Which of the following correctly species what a standard normal variable is?
Correct
A regular standard variable is one that follows a normal distribution with a mean 0 and a standard deviation 1. Many variables are quickly converted into regular common variables.
Incorrect
A regular standard variable is one that follows a normal distribution with a mean 0 and a standard deviation 1. Many variables are quickly converted into regular common variables.
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Question 5 of 10
5. Question
Which of the following is not an evaluation step to calculate the standard deviations from the mean?
Correct
Suppose we observe a sample value of 24 which has a mean of 20 and a standard deviation of 5. Firstly, we measure how far from the mean the observation is. This is achieved by subtracting the mean of 20 from the observation value of 24, leaving us a value of 4. Next, the standard deviation is divided into our number, which gives us 0.8 (4/5).This tells us that the observation is 0.8 standard deviations from the mean.
Incorrect
Suppose we observe a sample value of 24 which has a mean of 20 and a standard deviation of 5. Firstly, we measure how far from the mean the observation is. This is achieved by subtracting the mean of 20 from the observation value of 24, leaving us a value of 4. Next, the standard deviation is divided into our number, which gives us 0.8 (4/5).This tells us that the observation is 0.8 standard deviations from the mean.
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Question 6 of 10
6. Question
If Chi-Square distribution is based on the sum of two standard normal variables how many degrees of freedom does it have?
Correct
The distribution of Chi-Square is based on the sums of natural, standard variables. When it is centered on the sum of two regular standard variables, then we assume it has two degrees of freedom. It has three degrees of freedom because it’s centered on the number of three. Like how many degrees of freedom increase, the distribution starts to take on a normal distribution form.
Incorrect
The distribution of Chi-Square is based on the sums of natural, standard variables. When it is centered on the sum of two regular standard variables, then we assume it has two degrees of freedom. It has three degrees of freedom because it’s centered on the number of three. Like how many degrees of freedom increase, the distribution starts to take on a normal distribution form.
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Question 7 of 10
7. Question
What does the term “test statistic” refers to regarding the statistical analysis?
Correct
The Chi-squared distribution is used mainly for goodness-of-fit testing. The word “test statistics” refers to a value derived from a sample used to test a given hypothesis.
Incorrect
The Chi-squared distribution is used mainly for goodness-of-fit testing. The word “test statistics” refers to a value derived from a sample used to test a given hypothesis.
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Question 8 of 10
8. Question
Keeping in mind Box Size Concepts, what happens to the amount of price history, and the chart size?
Correct
Gradually, as the size of the box increases, the price history becomes smaller and the chart is squeezed to the left, as fewer columns are needed. Eliminating the noise makes the chart more useful for traders or investors interested in longer periods and activities.
Incorrect
Gradually, as the size of the box increases, the price history becomes smaller and the chart is squeezed to the left, as fewer columns are needed. Eliminating the noise makes the chart more useful for traders or investors interested in longer periods and activities.
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Question 9 of 10
9. Question
Given the situation where the horizontal lines bunch together, sometimes overlapping at the same price level what effect does it make to the support and the resistance lines regarding the concepts used in trend analysis?
Correct
Where those horizontal lines bundle together, a support or resistance zone sometimes overlaps at the same price level. The more horizontal lines there are inside, this zone is usually stronger. In other words, the more times the price level has stopped earlier progress or enabled earlier falls, the greater the potential resistance or support would become.
Incorrect
Where those horizontal lines bundle together, a support or resistance zone sometimes overlaps at the same price level. The more horizontal lines there are inside, this zone is usually stronger. In other words, the more times the price level has stopped earlier progress or enabled earlier falls, the greater the potential resistance or support would become.
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Question 10 of 10
10. Question
What type of scales should be used to plot the prices to represent it graphically?
Correct
In general, price units are plotted on the stock chart’s vertical axis. The analyst shall decide the scale to be used, or the difference between certain price units. Two types of scales are commonly used: an integer scale, and a semi-logarithmic scale.
Incorrect
In general, price units are plotted on the stock chart’s vertical axis. The analyst shall decide the scale to be used, or the difference between certain price units. Two types of scales are commonly used: an integer scale, and a semi-logarithmic scale.