Page 18 - FINAL CFA SLIDES DECEMBER 2018 DAY 4

Session Unit 2:
8. Statistical Concepts & Market Returns (A/A/A/A/C/C)

A. Efficiency, consistency, and unbiasedness are desirable properties of an estimator.

A. An estimator is efficient if the variance of its sampling distribution is smaller than that of all

other unbiased estimators of the parameter.
A. As the df get larger, the t-distribution approaches the normal
distribution. As the df fall, the peak of the t-distribution flattens and its tails
get fatter (more probability in the tails—that’s why, all else the same, the
critical t increases as the df decreases).

A. The primary example of look-ahead bias is using year-end financial information in conjunction with market pricing data to compute
ratios like the price/earnings (P/E). The E in the denominator is typically not available for 30–60 days after the end of the period. Hence, data
that was available on the test date (P) is mixed with information that was not available (E). That is, the P is “ahead” of the E.

C. CI = 19-44, hence 31.5 + 1.96 (SE) = 44; SE = 44-31.5/1.96

C. Mutual fund performance studies are most closely associated with survivorship bias because only the
better-performing funds remain in the sample over time.