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Business Statistics Assignment

A time series tracks numerical data points, such as a security's price, recorded at regular intervals over a specified period of time. It can be used to analyze how a variable changes over time and compare those changes to shifts in other variables. Moving averages smooth out price data by calculating average prices over specified time frames, reducing the impact of random, short-term fluctuations. Common moving averages use time periods of 15, 20, 30, 50, 100, and 200 days, with shorter periods being more sensitive to price changes.

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90 views4 pages

Business Statistics Assignment

A time series tracks numerical data points, such as a security's price, recorded at regular intervals over a specified period of time. It can be used to analyze how a variable changes over time and compare those changes to shifts in other variables. Moving averages smooth out price data by calculating average prices over specified time frames, reducing the impact of random, short-term fluctuations. Common moving averages use time periods of 15, 20, 30, 50, 100, and 200 days, with shorter periods being more sensitive to price changes.

Uploaded by

Arun Nalamara
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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A time series is a sequence of numerical data points in successive order. In


investing, a time series tracks the movement of the chosen data points, such as a
security’s price, over a specified period of time with data points recorded at regular
intervals. There is no minimum or maximum amount of time that must be included,
allowing the data to be gathered in a way that provides the information being sought
by the investor or analyst examining the activity.
A time series can be taken on any variable that changes over time. In investing, it is
common to use a time series to track the price of a security over time. This can be
tracked over the short term, such as the price of a security on the hour over the
course of a business day, or the long term, such as the price of a security at close on
the last day of every month over the course of five years.
Time Series Analysis
Time series analysis can be useful to see how a given asset, security, or economic
variable changes over time. It can also be used to examine how the changes
associated with the chosen data point compare to shifts in other variables over the
same time period.

Moving average method:

In statistics, a moving average is a calculation used to analyze data points by


creating a series of averages of different subsets of the full data set. In finance, a
moving average (MA) is a stock indicator that is commonly used in technical
analysis. The reason for calculating the moving average of a stock is to help smooth
out the price data by creating a constantly updated average price.

By calculating the moving average, the impacts of random, short-term fluctuations on


the price of a stock over a specified time-frame are mitigated.

Moving average is a simple, technical analysis tool. Moving averages are usually
calculated to identify the trend direction of a stock or to determine its support and
resistance levels. It is a trend-following–or lagging–indicator because it is based on
past prices.
The longer the time period for the moving average, the greater the lag.
Moving averages are a totally customizable indicator, which means that an investor
can freely choose whatever time frame they want when calculating an average. The
most common time periods used in moving averages are 15, 20, 30, 50, 100, and
200 days. The shorter the time span used to create the average, the more sensitive
it will be to price changes. The longer the time span, the less sensitive the average
will be.
Investors may choose different time periods of varying lengths to calculate moving
averages based on their trading objectives. Shorter moving averages are typically
used for short-term trading, while longer-term moving averages are more suited for
long-term investors.
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Predicting trends in the stock market is no simple process. While it is impossible to


predict the future movement of a specific stock, using technical analysis and
research can help you make better predictions.
There are two types of moving average
1.simple moving average: it is calculated by taking the arithmetic mean of a given set
of values
SMA= A1+A2+A3+…..+An/n
2. exponential moving average: The exponential moving average is a type of moving
average that gives more weight to recent prices in an attempt to make it more
responsive to new information

Definition: The Hypothesis is an assumption which is tested to check whether the


inference drawn from the sample of data stand true for the entire population or not.
Hypothesis Testing Procedure
The following steps are followed in hypothesis testing:

1. Set up a hypothesis
2. Set up a suitable significance level
3. Determine a suitable test statistic
4. Determine the critical region.
5. Perform computations
6. Decision making
1. Set up a Hypothesis: The first step is to establish the hypothesis to be
tested. The statistical hypothesis is an assumption about the value of some
unknown parameter, and the hypothesis provides some numerical value or
range of values for the parameter. Here two hypotheses about the population
are constructed Null Hypothesis denoted by H0 and Alternative
Hypothesis denoted by H1.
2. Set up a Suitable Significance Level: Once the hypothesis about the
population is constructed the researcher has to decide the level of
significance, i.e. a confidence level with which the null hypothesis is accepted
or rejected. The significance level is denoted by ‘α’ and is usually defined
before the samples are drawn such that results obtained do not influence the
choice
3. Determining a Suitable Test Statistic: After the hypothesis are constructed,
and the significance level is decided upon, the next step is to determine a
suitable test statistic and its distribution. Most of the statistic tests assume the
following form:
Test statistic = sample statistic-hypothesized parameter/sta ndard error
of the statistic
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4. Determining the Critical Region: Before the samples are drawn it must be


decided that which values to the test statistic will lead to the acceptance of
H0 and which will lead to its rejection. The values that lead to rejection of H 0 is
called the critical region.

5. Performing Computations: Once the critical region is identified, we compute


several values for the random sample of size ‘n.’ Then we will apply the
formula of the test statistic as shown in step (3) to check whether the sample
results falls in the acceptance region or the rejection region.
6. Decision-making: Once all the steps are performed, the statistical
conclusions can be drawn, and the management can take decisions. The
decision involves either accepting the null hypothesis or rejecting it. The
decision that the null hypothesis is accepted or rejected depends on whether
the computed value falls in the acceptance region or the rejection region.

Thus, to test the hypothesis, it is necessary to follow these steps systematically so


that the results obtained are accurate and do not suffer from either of the statistical
error

6 3 (0.3)3 (0.7)3 = 0.18522.

5A:
The probability mass function of a binomial random variable X with parameters n and p
is f (k) = P(X = k) = {n k }* p ^k (1 − p)^ n−k    for k = 0, 1, 2, 3, . . . , n.
{n k } counts the number of outcomes that include exactly k successes and n − k
failures.
1)if we call heads a sucess then this X has a binomial distribution with parameters n=6
and p=0.3
q= 0.7
P(X = 2) = { 6 2 } (0.3)^2 (0.7)^4
6!/2! 4! {(0.3)^2*(0.7)^4 ]
 =15* 0.09 *  0.168 
 = 0.3241
i) for P(X=3)
(ii) P(X = 3) = {6  3} (0.3)^3 (0.7)^3
= 6!/3!*3![(0.3)^3*(0.7)^3]
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 = 0.185
p(X=4)= {6 4} (0.3)^4(0.7)^2 
=6!/4!*2![(0.3)^2*(0.7)^2]
=0.059
p(X=5)= {6 5}(0.3)^5(0.7)^1 = 0.01
 (iii) We need P(1 < X ≤ 5) P(X = 2) + P(X = 3) + P(X = 4) + P(X = 5) 
      = 0.324 + 0.185 + 0.059 + 0.01 
       = 0.578

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