CFA Level 1 Questions rated A
What are the 4 types of measurement scales? - 1. Nominal Scales
2. Ordinal Scales (Assigned to a category)
3. Interval Scales (Relative ranking)
4. Ratio Scales (Equal differences between scale values)
NOIR
When do we use geometric and arithmetic means to analyze investment returns?
- Arithmetic Mean: To estimate next year's return
Geometric Mean: Measure of past performance
What are the 3 different types of probabilities? - 1. Empirical Probability (Past
data)
2. Priori Probability (Formal reasoning)
3. Subjective Probability (Use of personal judgement)
What is the difference between time-series data and cross-sectional data? - Time-
Series: Data taken over a period of time
Cross-Sectional: Data taken at a single point in time
, CFA Level 1 Questions rated A
What are the 3 desirable properties of an estimator? - 1. Unbiased (Expected
value of estimator is equal to the parameter)
2. Efficient (Variance of its sampling distribution is small)
3. Consistent (Accuracy of parameter estimate increases as sample size increases)
What are the steps of Hypothesis Testing? - 1. State the hypothesis
2. Select the appropriate test statistic
3. Specify the level of significance
4. State the decision rule regarding the hypothesis
5. Collect the sample and calculate the sample statistics
6. Make a decision regarding the hypothesis
7. Make a decision based on the results of the test
What is a Type 1 and Type 2 Error? - Type I: Rejection of null when it is actually
true
Type II: Failure to reject null when it is actually false
What are the 3 reasons why statistical significance does not imply economic
significance? - 1. Transaction Costs
2. Taxes
What are the 4 types of measurement scales? - 1. Nominal Scales
2. Ordinal Scales (Assigned to a category)
3. Interval Scales (Relative ranking)
4. Ratio Scales (Equal differences between scale values)
NOIR
When do we use geometric and arithmetic means to analyze investment returns?
- Arithmetic Mean: To estimate next year's return
Geometric Mean: Measure of past performance
What are the 3 different types of probabilities? - 1. Empirical Probability (Past
data)
2. Priori Probability (Formal reasoning)
3. Subjective Probability (Use of personal judgement)
What is the difference between time-series data and cross-sectional data? - Time-
Series: Data taken over a period of time
Cross-Sectional: Data taken at a single point in time
, CFA Level 1 Questions rated A
What are the 3 desirable properties of an estimator? - 1. Unbiased (Expected
value of estimator is equal to the parameter)
2. Efficient (Variance of its sampling distribution is small)
3. Consistent (Accuracy of parameter estimate increases as sample size increases)
What are the steps of Hypothesis Testing? - 1. State the hypothesis
2. Select the appropriate test statistic
3. Specify the level of significance
4. State the decision rule regarding the hypothesis
5. Collect the sample and calculate the sample statistics
6. Make a decision regarding the hypothesis
7. Make a decision based on the results of the test
What is a Type 1 and Type 2 Error? - Type I: Rejection of null when it is actually
true
Type II: Failure to reject null when it is actually false
What are the 3 reasons why statistical significance does not imply economic
significance? - 1. Transaction Costs
2. Taxes
