Page 42 - FINAL CFA I SLIDES JUNE 2019 DAY 4
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LOS 12.k: Distinguish between parametric Session Unit 3:
and nonparametric tests and describe 12. Hypothesis Testing
situations in which the use of nonparametric
tests may be appropriate, p.302.
Parametric tests, like the t-test, F-test, and chi-square tests, 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.
