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CFA Level I · CFA Level I Exam · Estimation and Hypothesis Testing

Which of the following is the most likely advantage of using bootstrap resampling to construct a confidence interval for a statistic?

The bootstrap can be applied without assuming a specific population distribution, because it builds the sampling distribution from the observed data itself. It still requires a representative original sample and does not guarantee smaller standard errors than analytical formulas.

  1. AIt guarantees a smaller standard error than the analytical formula
  2. BIt removes the need for the original sample to be representative
  3. CIt can be applied without assuming a specific distribution for the populationCorrect

Explanation

The bootstrap uses the empirical distribution of the observed data, so it does not require a distributional assumption or a formula for the statistic. It still relies on a representative sample and does not guarantee a smaller standard error.

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