Class notes
Intro to Financial Econometrics
- Course
- Institution
part 2 for an intro to financial econometrics. Features advanced statistics in economic examples.
[Show more]
Seller
Follow
princeyork
Content preview
Scatter Plots, Association and Correlationprobability
Population Sample
N=size statistics n=size
N = size of population n = size of sample
Observations are 𝑥1, 𝑥2, … , 𝑥𝑁 Observations are 𝑥1, 𝑥2, … , 𝑥𝑛
Parameters Sample statistics (Estimators)
p = % in a population 𝑝̂ = % in a sample
𝜇 = average in a population 𝑋̅= average in a sample
𝜎2 = variance in a population 𝑠2 = variance in a sample
𝜎 = standard deviation in a population s = standard deviation in a sample
• The above discussion uses one variable to describe a population or a sample.
• Suppose we use two variables x and y to describe a population or a sample
The picture would look like:
probability
Population Sample
N=size statistics n=size
N = size of population n = size of sample
Observations are Observations are
(𝑥1, 𝑦1), (𝑥2, 𝑦2), … , (𝑥𝑁, 𝑦𝑁) (𝑥1, 𝑦1), (𝑥2, 𝑦2), … , (𝑥𝑛, 𝑦𝑛)
Parameters Sample statistics (Estimators)
𝜎𝑥𝑦 = covariance between x and y 𝑠𝑥𝑦 = covariance between x and y
𝜌 = correlation coefficient between x and y r = correlation coefficient between x and y
, 1. Scatterplots
Example 1. The scatterplot is performed using Excel.
x y
28 12.4 y
14
28 11.7
12
32.5 12.4
10
39 10.3
8
45.9 9.4
6
57.8 9.5
4
58.1 8
2
62.5 7.5
0
x
0 10 20 30 40 50 60 70
Example: Interest Rates and Inflation
• At the heart of Canada’s monetary policy framework is the inflation-control target, which
is two percent, the midpoint of a 1 to 3 percent target range.
o The inflation target is expressed as the year-over-year increase in the total
consumer price index (CPI). The Bank also monitors a set of “core” inflation
measures.
o To achieve the inflation target, the Bank adjusts (raises or lowers) its key policy rate
– the target for the overnight rate.
o Monetary policy actions take time – usually between six and eight quarters – to
work their way through the economy and have their full effect on inflation.
https://www.bankofcanada.ca/core-functions/monetary-policy/#inflation and https://www.bankofcanada.ca/core-
functions/monetary-policy/inflation/
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller princeyork. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79373 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now