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A course on statistics for finance

Article  in  Journal of Applied Statistics · April 2014

DOI: 10.1080/02664763.2013.853931

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A course on statistics for finance

a
Božidar V. Popović
a
University of Montenegro Faculty of Philosophy, Nikšić,
Montenegro
Published online: 29 Oct 2013.

To cite this article: Božidar V. Popović (2014) A course on statistics for finance, Journal of Applied
Statistics, 41:4, 914-915, DOI: 10.1080/02664763.2013.853931

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 914 Book Reviews

given in Chapter 3, such as survival and hazard rate functions, moments, quantiles, minima of
order statistics, and mean residual life. Chapter 4 explores lifetime Weibull models, including
mixtures of Weibull random variables, the stress-strength parameter, age replacement, optimum
burn-in, warranties and Weibull renewal function. Based on some sampling techniques, Weibull
parameters are estimated using various estimation methods in Chapter 5. Chapter 6 deals with
sample size selection via two approaches, as well as proposing some tests for goodness of fit
using Kolmogorov–Smirnov and Anderson–Darling approaches. Chapter 7 describes the soft-
ware available from the author’s web site which is used for selecting sample sizes and percentiles,
and inference on series systems of Weibull distributed components. Statistical inference from
multiple Weibull samples is discussed in Chapter 8 involving a set of tests for the parameters of
interest. Chapter 9 is concerned with the Weibull regression model and inference of such a model.
Chapter 10 extends the two-parameter Weibull distribution by adding a third parameter for adding
flexibility of the distribution and exhibits some aspects of inference of such extension. Chapter 11
presents a methodology for the analysis of factorial experiments with Weibull response variable
Downloaded by [Univ Studi Della Calabria] at 06:18 01 July 2014

assuming the presence of two factors.

The material is excellent and presented in an obvious manner. Chapters of the book are supported
by many examples and exercises. A minor criticism of the book comes in not showing Figure
2.5 in the text and not stating a hint about other recent extensions to Weibull distributions like
exponentiated Weibull distribution. The book represents a valuable text for courses in statistics
and reliability engineering.

Hassan S. Bakouch
Tanta University, Egypt
hnbakouch@yahoo.com
©2013, Hassan S. Bakouch
http://dx.doi.org/10.1080/02664763.2013.853927

A course on statistics for finance, by S.L. Sclove, Boca Raton, FL, Chapman and Hall/CRC
Press, 2013, xxvii+251 pp., £57.99 or US$89.95 (hardback), ISBN 9781439892541

This book is intended for university courses and for those who are involved in financial analysis
and research. It is a very well written and easy to read book, with numerous useful and practical
examples, figures and exercises. This book is suitable for those who have no background in
finance. Its style is very motivating for readers, keeping their attention and giving them ideas on
the importance of statistics applied to finance.
The book consists of nine chapters. Chapter 1 is about the basic statistical methods needed for
understanding further chapters. In Chapter 2 the author gives an introduction to stock price series
and ordinary and continuous rates of return. Chapter 3 introduces covariance and correlation with
emphasis on two, three and m stocks, while Chapter 4 deals with simple linear regression, with the
Capital Asset Pricing Model given as example. Chapter 5 is devoted to multiple regression with
the very useful Fama/French three factor model. The Sharpe ratio and Value at Risk, together with
introducing bi-criterion portfolio analysis, are the main topics of Chapter 6. Chapter 7 introduces
a single criterion based on functions derived from expected exponential utility for investor wealth.
A very brief introduction to Box/Jenkins ARIMA models is given in Chapter 8, while Chapter
9 considers some basic concepts of the Bull and Bear markets and discusses some ways of
segmenting financial time series. This book finishes with three very useful appendices: Appendix
A is review of relevant vector and matrix theory, Appendix B reminds readers of the basic concepts
about the Gaussian distribution, and Appendix C is about Lagrange multipliers.
 Book Reviews 915

There are several typos and minor errors, but they do not affect the quality of this book. In
summary, this reviewer enjoyed reading the book and he recommends it to everyone who wants
to learn about statistics applied in finance.

Božidar V. Popović
University of Montenegro Faculty of Philosophy, Nikšić, Montenegro
bozidarpopovic@gmail.com
©2013, Božidar V. Popović
http://dx.doi.org/10.1080/02664763.2013.853931

Applied categorical and count data analysis, by W. Tang, H. He and M.X. Tu, Boca Raton,
FL, Chapman and Hall/CRC Press, 2013, xx + 363 pp., £50.00 or US$89.95 (hardback), ISBN
978-1-4398-0624-1
Downloaded by [Univ Studi Della Calabria] at 06:18 01 July 2014

This book is a compilation of notes the authors have written over a five-year period covering ana-
lysis of discrete data. The coverage is more complete than Agresti’s classic textbook on categorical
data analysis [1]. Apart from the normal coverage for books of these types like regression models
for count data, contingency tables and analysis of discrete survival time data, it covers more up
to date topics like longitudinal data analysis, instrument evaluation including receiver operating
characteristic curves and analysis of incomplete data.
The subject matter is suitable for a senior undergraduate or masters and PhD students in Bio-
statistics and Statistics. Some pre-requisite statistical knowledge is required. However, the authors
try to make up for this in Chapter 1 by having a gentle introduction reviewing the main tenets of
statistics such as the central limit theorem, maximum likelihood estimation, estimating equations
and U-statistics. The authors should be commended on the production of a volume that is not
only accessible to researchers with little theoretical background but also gives explanations on
the ‘whys’ – that is too often omitted from books of this calibre.
Supplementary worked examples with four main statistical software packages – R, SPSS, Stata
and SAS – make this book a vital tool for anyone who wants to get his hands dirty using real
data. The coherent structure of the book allows for extending models. While it may be some time
before Agresti is finally dethroned as the number one book on categorical data analysis, this book
will definitely be a most sought after source in the years to come. Applied statisticians should
have a copy in their private library.

Reference
[1] A. Agresti, Categorical Data Analysis, 3rd ed., Wiley, Hoboken, NJ, 2013.

Isaac Dialsingh
The University of the West Indies, Trinidad and Tobago
isaac.dialsingh@sta.uwi.edu
©2013, Isaac Dialsingh
http://dx.doi.org/10.1080/02664763.2013.853934

Categorical data analysis, third edition, by Alan Agresti, Hoboken, NJ, Wiley, 2013, xvi + 714
pp., £90.50 or US$135.00 (hardback), ISBN 978-0-470-46363-5

This textbook encompasses full-fledged methodologies in categorical data analysis which,

together with the supplementary online material, can be readily used in the classroom. The book

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