Late night Stats Bananza

C>question 5.

thepinkman Wrote: ------------------------------------------------------- > Q5: > > Frank Batchelder and Miriam Yenkin are analysts > for Bishop Econometrics. Batchelder and Yenkin are > discussing the models they use to forecast changes > in China’s GDP and how they can compare the > forecasting accuracy of each model. Batchelder > states, “The root mean squared error (RMSE) > criterion is typically used to evaluate the > in-sample forecast accuracy of autoregressive > models.” Yenkin replies, “If we use the RMSE > criterion, the model with the largest RMSE is the > one we should judge as the most accurate.” > > With regard to their statements about using the > RMSE criterion: > > > A) Batchelder is correct; Yenkin is incorrect. > > B) Batchelder is incorrect; Yenkin is correct. > > C) Batchelder is incorrect; Yenkin is incorrect. > > > D) Batchelder is correct; Yenkin is correct. Q5. C … BOTH ARE WRONG RMSE for out-of-samples and LOWER the RMSE better the forecasts

Question 5. C Both are incorrect I think

Damn, dinesh is on. RMSE is for out of sample.

yea!!! I am back… After wasting full day… I have a kick on my groin to sit here and answer questions :frowning:

I am the opposite. I think I am calling it a night.

3 b 4 b 5 c Good job.

PINK - Q4 is B? How can that be?

yeah I’m with you on number 4 dinesh.

Why is 4 B? Standard equation is: y(t+1) = a0 + a1y(t) + e(t) As it’s a random walk it’s: y(t+1) = a0 + y(t) + e(t) As it’s without drift: y(t+1) = y(t) + e(t) We know y(t) = 2.2 so E[y(t+1)] = 2.2 surely. What have I missed? I’m going A is incorrect B C and D are all right so must be.

nothing hurrican, you are bang-on. I think pink has a typo there…

Arrr. Really sorry guys. The answer is for 4 is A. #6 The primary concern when deciding upon a time series sample period is which of the following factors? A) Current underlying economic and market conditions. B) The length of the sample time period. C) The total number of observations. D) The root mean squared error (RMSE) of the model.

Black Swan Wrote: ------------------------------------------------------- > yeah I’m with you on number 4 dinesh. How have you been, took any more tests? I took the Schweser6-1AM and got 71%

thepinkman Wrote: ------------------------------------------------------- > Arrr. Really sorry guys. The answer is for 4 is > A. > > #6 > > The primary concern when deciding upon a time > series sample period is which of the following > factors? > > A) Current underlying economic and market > conditions. > > B) The length of the sample time period. > > C) The total number of observations. > > D) The root mean squared error (RMSE) of the > model. Guessing on A here. For n different economic conditions, we better have n-time series to avoid the pooling data problems.

6 D?

  1. Must be A.

Why wouldn’t it be B? If you have a time period that is too short or too long your regression will be wrong.

Nibs - My logic (which is probably not logicical) is: You want the sample to reflect current conditions which you want to have applied for the whole sample so A or B are both important. But if you have 2 models isn’t the better one the one that provides a better (i.e. lower) RMSE so D is the primary concern

6-A

don’t quit now #7 An analyst is trying to determine whether fund return performance is persistent. The analyst divides funds into three groups based on whether their return performance was in the top third (group 1), middle third (group 2), or bottom third (group 3) during the previous year. The manager then creates the following equation: R = a + b1D1 + b2D2 + b3D3 + å, where R is return premium on the fund (the return minus the return on the S&P 500 benchmark) and Di is equal to 1 if the fund is in group i. Assuming no other information, this equation will suffer from: A) collinearity. B) heteroskedasticity. C) serial correlation. D) non-normality