the name implies ÒorderÓ counts, and the size of the number indicates superiority and provides rank. WebsterÕs Dictionary defines ordinal as Òof a specified order or rank in a seriesÓ and an ordinal number as Òa number designating the place (as first, second, or third) occupied by an item in a ordered sequence.Ó The numerical value of ordinal data indicates its relative position or standing among the data set, however, the interval between the numbers (the scale) is arbitrary, need not be consisted, and is therefore meaningless. Consequently, ordinal data cannot be combined arithmetically. The assignment of the numerical values of 3 = superior, 2 = good, and 1 = average, creates ordinal data. It is incorrect to assume that Ògood,Ó with a numerical value of two, is twice as important or valuable as ÒaverageÓ which has been assigned the numerical value one. The scale, a one unit interval between values, is arbitrary and could just as well have been, Superior = 648, Good = 50, and Average = 46. Because the interval is arbitrary, the values cannot be combined arithmetically. In the first case, two ÒGoodsÓ (2+2) would exceed one ÒSuperiorÓ but in the second case two ÒGoodsÓ (50+50) would remain well below one superior. The result of such arithmetic clearly is nonsensical. Ordinal data is useful because it clearly shows relative rank among data points. An ordinal scale is invariant under monotone increasing transformations. The numerical values that represent ordinal data indicate relative superiority and rank but an ordinal scale does not indicate by how much one factor is preferred over another. Ordinal data cannot be usefully combined arithmetically.
Now that I think about the answer, I do believe it is ordinal, though I answered nominal. Buy - undervalued Hold - properly valued Sell - Overvalued In terms of equity research, these recommendations are all derived from numerical comparison i.e. Stock A is overvalued by 2% above its intrinsic value, therefore we can assign numerical qualities to these stocks, although direct comparison won’t derive much meaning. Wish I had thought of this during the exam.
you sure did add a lot of context to the original questions that wasn’t there before to get to your conclusion that its ordinal. who said overvalued was in any order compared to the other two. it might be for a long only mutual fund. but the order could be reversed for a short fund or a long/short. its nominal until you add context frangoya Wrote: ------------------------------------------------------- > Now that I think about the answer, I do believe it > is ordinal, though I answered nominal. > Buy - undervalued > Hold - properly valued > Sell - Overvalued > In terms of equity research, these recommendations > are all derived from numerical comparison i.e. > Stock A is overvalued by 2% above its intrinsic > value, therefore we can assign numerical qualities > to these stocks, although direct comparison won’t > derive much meaning. > Wish I had thought of this during the exam.
besides the fact that buy doesn’t have to mean “undervalued”. it could be based on event predicting, momentum, etc. ryanwtyler Wrote: ------------------------------------------------------- > you sure did add a lot of context to the original > questions that wasn’t there before to get to your > conclusion that its ordinal. who said overvalued > was in any order compared to the other two. it > might be for a long only mutual fund. but the > order could be reversed for a short fund or a > long/short. its nominal until you add context > frangoya Wrote: > -------------------------------------------------- > ----- > > Now that I think about the answer, I do believe > it > > is ordinal, though I answered nominal. > > Buy - undervalued > > Hold - properly valued > > Sell - Overvalued > > In terms of equity research, these > recommendations > > are all derived from numerical comparison i.e. > > Stock A is overvalued by 2% above its intrinsic > > value, therefore we can assign numerical > qualities > > to these stocks, although direct comparison > won’t > > derive much meaning. > > Wish I had thought of this during the exam.
I really would bet huge that the answer is ordinal. In the end, ryan has this really good point ( though I think he missed the question). The measurement characteristics of the data really only exist when you start doing something with it. The “Buy”/“Sell”/“Hold” thing are just brokerage rankings. Sometimes they even add extra categories like “Strong Buy” (is there a “Strong Sell”?). They might as well rank them 1, 2, 3 which everyone would agree is ordinal. However, suppose that you are doing an analysis of the relationship between “Buy”/“Sell”/“Hold” and market cap. Nearly everyone would just do an ANOVA treating the BSH thing as nominal data.
i actually answered ordinal on the test. ha! JoeyDVivre Wrote: ------------------------------------------------------- > I really would bet huge that the answer is > ordinal. In the end, ryan has this really good > point ( though I think he missed the question). > The measurement characteristics of the data really > only exist when you start doing something with it. > The “Buy”/“Sell”/“Hold” thing are just brokerage > rankings. Sometimes they even add extra > categories like “Strong Buy” (is there a “Strong > Sell”?). They might as well rank them 1, 2, 3 > which everyone would agree is ordinal. > > However, suppose that you are doing an analysis of > the relationship between “Buy”/“Sell”/“Hold” and > market cap. Nearly everyone would just do an > ANOVA treating the BSH thing as nominal data.
LOL–all of this for nothing! =)
you call the truth nothing? soxboys21 Wrote: ------------------------------------------------------- > LOL–all of this for nothing! =)
Here we go again…
“A nominal scale is a list of categories to which objects can be classified.” You can classify these as buy, hold sell. It is no doubt nominal. You can’t rank those because they are not related. You can’t tell me that a buy is better than a sell, what if I was short?
It’s not about better; it’s about having order. A classification of “Buy” at least in theory means that a broker is giving that stock a higher recommendation than one with “Sell”. The “higher” thing means there is an ordering.
Joey makes 3 posts and this thread still won’t die! Have you people no shame 
nirjraina Wrote: ------------------------------------------------------- > Joey makes 3 posts and this thread still won’t > die! Have you people no shame HAHAHA … generally Joey has one post, and discussion ends there. This one went too far. Shame on you guys LOL BTW I did ordinal
I answered ORDINAL - coz a question to Mock or sample exam had ORDINAL answer toooo !! I had no idea…Need some luck for all the guesses I made !