Mizi
January 15, 2015, 1:50am
#1
Why does covraince increase as the number of holdings increases?
I’m not sure what you mean.
Covariance is a measure of the interaction of _ two _ variables. No more, and no fewer.
If you can add some context I may be able to shed some light on it.
S2000magician:
I’m not sure what you mean.
Covariance is a measure of the interaction of _ two _ variables. No more, and no fewer.
If you can add some context I may be able to shed some light on it.
A small side note: I know it’s not in the CFA curriculum, but the term “interaction” has a very specific and a very different meaning in statistics than most people would think (check out the term in multiple linear regression). I would just refer to it (covariance) as measurement of the linear relationship between two variables.
tickersu:
S2000magician:
I’m not sure what you mean.
Covariance is a measure of the interaction of _ two _ variables. No more, and no fewer.
If you can add some context I may be able to shed some light on it.
A small side note: I know it’s not in the CFA curriculum, but the term “interaction” has a very specific and a very different meaning in statistics than most people would think (check out the term in multiple linear regression). I would just refer to it (covariance) as measurement of the linear relationship between two variables.
Good point.
I was using it in a nontechnical sense.