Page 12 - FINAL CFA SLIDES DECEMBER 2018 DAY 4
P. 12
Session Unit 2:
8. Statistical Concepts and Market Returns
CI for the Population Mean: Normal With Unknown PV p.259
tα/2 = the t-reliability factor (a.k.a. t-statistic or critical t-value) corresponding to a t-distributed random
variable with n – 1 df, where n is the sample size. The area under the tail of the t-distribution to the right
of tα/2 is α/2
Owing to the relatively fatter tails of the t-distribution, CI constructed using t-reliability
factors (tα/2) will be more conservative (wider) than those constructed using z-reliability
factors (zα/2). Dis we explain why? Why?
Example: p.260: McCreary, Inc -Recall that we took a sample of the past 30 monthly stock
returns and determined that the mean return was 2% and the sample SD was 20%. Since the PV
is unknown, the SE was:
Now, let’s construct a 95% CI for
the mean monthly return.
