Page 37 - FINAL CFA I SLIDES JUNE 2019 DAY 4
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LOS 12.k: Distinguish between parametric and Session Unit 3:
nonparametric tests and describe situations in 12. Hypothesis Testing
which the use of nonparametric tests may be
appropriate, p.302.
Parametric tests (test, F, chi-square) focus on specific population parameters (mean, variance) and
make assumptions regarding the distribution of the population from which samples are drawn.
Nonparametric tests either do not consider a particular population parameter or have few
assumptions about the sampled population distribution!
e.g. Spearman rank correlation test, say of stock returns over 2 years:
+ 0.85 = high (low) rank in one year is associated with a high (low) rank in the second year.
