𝑃𝑡 − 𝑃𝑡−1 + 𝐷𝑡 𝑛 𝑛

𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 𝑅𝑒𝑡𝑢𝑟𝑛: 𝑅𝑡 = 2

𝑃𝑡−1 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒: σ (𝑅𝑝 ) = ∑ ∑ 𝑤𝑖 𝑤𝑗 Cov(𝑅𝑖 , 𝑅𝑗 )
Range = Maximum value – Minimum value 𝑖=1 𝑗=1

∑𝑁
𝑖=1 𝑋𝑖
𝐵𝑎𝑦𝑒𝑠 ′ 𝑅𝑢𝑙𝑒: 𝑃(Event|Info)
𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑀𝑒𝑎𝑛: µ =
𝑁 𝑃(Info|Event)
=( ) 𝑃(Event)
∑𝑁 𝑃(Info)
𝑖=1 𝑋𝑖
𝑆𝑎𝑚𝑝𝑙𝑒 𝑀𝑒𝑎𝑛: 𝑋̅ = 𝑁 𝑛!
𝑀𝑢𝑙𝑡𝑖𝑛𝑜𝑚𝑖𝑎𝑙:
𝑛 𝑛1 ! 𝑛2 ! … … . . 𝑛𝑘 !
𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑀𝑒𝑎𝑛: 𝑋̅𝑤 = ∑ 𝑤𝑖 𝑋𝑖 𝑛 𝑛!
𝐶𝑜𝑚𝑏𝑖𝑛𝑎𝑡𝑜𝑟𝑖𝑎𝑙: 𝑛𝐶𝑟 = ( ) =
𝑖=1 𝑟 (𝑛 − 𝑟)! 𝑟!
𝑦 𝑛!
𝑃𝑜𝑠𝑖𝑡𝑖𝑜𝑛 𝑜𝑓 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑖𝑙𝑒: 𝐿𝑦 = (𝑛 + 1) 𝑃𝑒𝑟𝑚𝑢𝑡𝑎𝑡𝑖𝑜𝑛: 𝑛𝑃𝑟 =
100 (𝑛 − 𝑟)!
∑𝑛𝑖=1|𝑋𝑖 − 𝑋̅|
Mean Absolute Deviation =
𝑛 𝐵𝑒𝑟𝑛𝑜𝑢𝑙𝑙𝑖 𝐵(1, 𝑝):
𝑀𝑒𝑎𝑛 = 𝑝; 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = 𝑝(1 − 𝑝)
∑𝑛𝑖=1 (𝑋𝑖 − 𝜇)2
𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒: 𝜎 2 =
𝑛 𝐵𝑖𝑛𝑜𝑚𝑖𝑎𝑙 𝐵(𝑛, 𝑝):
∑𝑛 (𝑋𝑖 −𝑋̅)2 𝑛!
Sample variance: 𝑠 2 = 𝑖=1
𝑝(𝑥) = 𝑃(𝑋 = 𝑥) = 𝑝 𝑥 (1 − 𝑝)𝑛−𝑥
𝑛−1 (𝑛 − 𝑥)! 𝑥!

(𝑋𝑖 − 𝑋̅)2 𝑀𝑒𝑎𝑛 = 𝑛𝑝; 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = 𝑛𝑝(1 − 𝑝)

𝑆𝑒𝑚𝑖𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒: ∑
𝑛∗ − 1
𝑓𝑜𝑟 𝑎𝑙𝑙 𝑋𝑖<𝑋̅

𝑠 𝐶𝑜𝑛𝑡𝑖𝑛𝑜𝑢𝑠 𝑈𝑛𝑖𝑓𝑜𝑟𝑚 𝐷𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛:

𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑜𝑓 𝑉𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛 = ̅
𝑋 𝑎+𝑏 (𝑏 − 𝑎)2
̅ ̅̅̅ μ= 𝜎2 =
𝑅𝑝 − 𝑅𝑓 2 12
Sharpe Ratio: 𝑆𝑝 =
𝑠𝑝 1
𝑃(𝐴𝐵) = 𝑃( 𝐴 ∣ 𝐵 )𝑃(𝐵) 𝑓(𝑥) = {𝑏 − 𝑎 𝑤ℎ𝑒𝑛 𝑎 < 𝑥 < 𝑏
𝑃(𝐴 𝑜𝑟 𝐵) = 𝑃(𝐴) + 𝑃(𝐵) − 𝑃(𝐴𝐵) 0 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒
𝑃(𝐴𝐵) = 𝑃(𝐴)𝑃(𝐵) 0 𝑤ℎ𝑒𝑛 𝑥 ≤ 𝑎
𝑥−𝑎
𝑃(𝐷𝑆) = 𝑃( 𝐷𝑆 ∣ 𝑅𝑅 )𝑃(𝑅𝑅) + 𝑃( 𝐷𝑆 ∣ 𝑁𝑅 )𝑃(𝑁𝑅) 𝐹(𝑥) = { 𝑤ℎ𝑒𝑛 𝑎 < 𝑥 < 𝑏
𝑏−𝑎
𝑛 1 𝑤ℎ𝑒𝑛 𝑥 ≥ 𝑏
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑣𝑎𝑙𝑢𝑒: 𝐸(𝑋) = ∑ 𝑋𝑖 𝑃( 𝑋𝑖 )
𝑖=1 Standardizing random variable X:
Variance: 𝑋−μ 𝑥−𝑥̅
𝑍= σ
or 𝑧 = s
𝑛

σ2 (𝑋) = ∑[𝑋𝑖 − 𝐸(𝑋)]2 𝑃(𝑋𝑖 ) = 𝐸{[𝑋 − 𝐸(𝑋)]2 } If random variable is the sample mean of a random sample
𝑖=1 𝑋̅ − μ
𝑍=
σ/√𝑛
Covariance: σ𝑅𝑖 , 𝑅𝑗 = ∑𝑛𝑖=1 𝑃(𝑅𝑖 )[𝑅𝑖 − 𝐸( 𝑅𝑖 )][𝑅𝑗 − 𝐸(𝑅𝑗 )]

σ𝑋,𝑌 Approximately 50% of all observations fall in the interval

𝐶𝑜𝑟𝑟𝑒𝑙𝑎𝑡𝑖𝑜𝑛: ρ𝑋,𝑌 =
σ𝑋 σ𝑌 µ ± (2/3)σ.
𝑛 Approximately 68% of all observations fall in the interval
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛: 𝐸(𝑅𝑝 ) = ∑ 𝑤𝑖 𝑅𝑖 µ ± σ.
𝑖=1 Approximately 95% of all observations fall in the interval
µ ± 2σ. Testing for a mean difference
Approximately 99% of all observations fall in the interval 𝑑̅ − μ𝑑0
𝑡=
µ ± 3σ. 𝑠𝑑̅
Standard error: 𝑠𝑑
𝑠𝑑̅ =
σ √𝑛
Population variance known: σ𝑋̅ =
√𝑛

𝑠 Standard error of the estimate:

Population variance unknown: 𝑠𝑋̅ =
√𝑛
∑𝑛 (𝑌𝑖 − 𝑏̂0 − 𝑏̂1 𝑋𝑖 )2
Where 𝑠 2 =
∑𝑛 ̅ 2
𝑖=1(𝑋𝑖 −𝑋) SEE = √ 𝑖=1
𝑛−1 𝑛−2

∑𝑛 (ε𝑖 )2
Confidence intervals: = √ 𝑖=1
𝑛−2
σ
Normal population, known σ: 𝑋̅ ± 𝑧α
2 √𝑛
𝑈𝑛𝑒𝑥𝑝𝑙𝑎𝑖𝑛𝑒𝑑 𝑉𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛
=√
s s 𝑛−2
Unknown σ, large sample: 𝑋̅ ± 𝑧α or 𝑋̅ ± 𝑡α
2 √𝑛 2 √𝑛

s 𝐸𝑥𝑝𝑙𝑎𝑖𝑛𝑒𝑑 𝑉𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛
Unknown σ, small sample: 𝑋̅ ± 𝑡α df = n – 1 Coefficient of Determination=
2 √𝑛 𝑇𝑜𝑡𝑎𝑙 𝑉𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛

90% confidence intervals: 𝑍0.05 = 1.645 𝑜𝑟 1.65

95% confidence intervals: 𝑍0.025 = 1.96 𝑅𝑆𝑆⁄
𝑘 𝑀𝑆𝑅
99% confidence intervals: 𝑍0.005 = 2.575 𝑜𝑟 2.58 𝐹= =
𝑆𝑆𝐸⁄ 𝑀𝑆𝐸
[𝑛 − (𝑘 + 1)]
Test statistic 𝐹 − 𝑡𝑒𝑠𝑡: 𝐹(𝑑𝑓1 , 𝑑𝑓2 )
Sample statistic − Population parameter under 𝐻0 𝑑𝑓1 = 𝑘
=
Standard error of the sample statistic 𝑑𝑓2 = 𝑛 − (𝑘 + 1)
𝑛

SSE = ∑(𝑌𝑖 − 𝑌̂𝑖 )2

t-test with df = n – 1 when population variance is 𝑖=1

unknown and sample is large or sample is small but 𝑛

(approximately) normally distributed: RSS = ∑(𝑌̂𝑖 − 𝑌̅)2

𝑖=1
𝑋̅ − μ0
𝑡𝑛−1 = 𝑠
⁄ 𝑛
√ SST=∑𝑛𝑖=1(𝑌𝑖 − 𝑌̅)2

z-test if the sample is large or the population is normally

distributed:
𝑋̅−μ0
Unknown pop. Variance: 𝑧 = 𝑠
⁄ 𝑛
√
𝑋̅−μ0
Known pop. Variance: 𝑧 = σ
⁄ 𝑛
√

(𝑛 − 1)𝑠 2
𝐶ℎ𝑖 − 𝑠𝑞𝑢𝑎𝑟𝑒 𝑡𝑒𝑠𝑡: 𝑋 2 =
σ20