Do we have to know the equation for the variance of the prediction error, or is this generally given to us for calculation of the prediction interval?
no formula is ever given on the cfai exam…
cpk, while i agree no cfai isn’t fond of asking direct formulas, but saying that they dont test on formulas would be incorrect. on l1, i remember they asked a question on median interpolation… and for the love of god i couldn’t remember the way to do it. And i distinctly remembered studying for it and skipping over thinking it could never be asked. but boy i was wrong… and hence I lost 1 question right then and there. by the way i remember studying this variance of prediction error 3 wks ago, but today i dont remember.
I did not mean a question using a formula would not be asked. I meant to say that if a formula looks important, either memorize it, or have ways to understand it. Do not expect the CFAI to list out the formula for you.
Of course the CFAI wouldn’t list out the formula for us, but in many (most) cases, the figure would be given (e.g. in almost all cases they will give you the variance or stdev, rather than make you go through the time consuming process of calculating it yourself). I was merely asking if anyone who has written before has ever encountered having to actually know the equation for Variance of Prediction Error.
they would give you the SEE and hope that you would use that to make the prediction confidence interval…