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In: Finance

This is for data analysis in finance. When finding the var estimates of different variables, what...

This is for data analysis in finance. When finding the var estimates of different variables, what do the coefficient,  standard error, and t statistic represent in the model

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Expert Solution

The coefficient of variation (COV) can determine the volatility of an investment. The COV is a ratio between the standard deviation of a data set to the expected mean. When used in the stock market, it helps to determine the amount of volatility in comparison to the expected return rate of an investment. The COV is found by dividing the volatility, or risk, by the absolute value of the investment's expected return.

A standard error is the standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the accuracy with which a sample represents a population. In statistics, a sample mean deviates from the actual mean of a population; this deviation is the standard error. The term "standard error" is used to refer to the standard deviation of various sample statistics such as the mean or median. For example, the "standard error of the mean" refers to the standard deviation of the distribution of sample means taken from a population. The smaller the standard error, the more representative the sample will be of the overall population.

A t-test is an analysis of two populations means through the use of statistical examination; a t-test with two samples is commonly used with small sample sizes, testing the difference between the samples when the variances of two normal distributions are not known.A form of hypothesis testing, the t-test is just one of many tests used for this purpose. Statisticians must use tests other than the t-test to examine more variables, as well as for test with larger sample sizes. For a large sample size, statisticians use a z-test. Other testing options include the chi-square test and the f-test.


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