CFA Level I · CFA Level I Exam · Statistical Distributions for Financial Asset Prices and Returns
Which statement about the chi-square distribution is most accurate?
The chi-square distribution is bounded below by zero and positively skewed. It arises from summing squared standard normal variables, so values cannot be negative, and it has a long right tail that diminishes as degrees of freedom increase.
- AIt is symmetric around zero and can take negative values.
- BIt is bounded below by zero and is positively skewed.Correct
- CIt is the ratio of two t-distributed variables.
Explanation
The chi-square is the sum of squared standard normal variables, so it cannot be negative, and it is right-skewed, especially at low degrees of freedom. It is not symmetric around zero. The F-distribution, not chi-square, is a ratio of chi-square variables divided by their degrees of freedom.
Did you get it right without looking?
One question tells you little. A timed set on Statistical Distributions for Financial Asset Prices and Returns shows your real accuracy, how long you take and where you lose marks.
More Statistical Distributions for Financial Asset Prices and Returns questions
- A binomial random variable has n = 10 trials and a success probability of 0.30 on each independent trial. The probability of exactly 2 succe…
- A stock rises from 80 to 100 over one year. The continuously compounded return for the year is closest to:
- A discrete random variable Y has the following probability distribution: P(Y=1)=0.2, P(Y=2)=0.3, P(Y=3)=0.4, P(Y=4)=0.1. The variance of Y i…
- Which statement best explains why continuously compounded returns are often used to model asset returns over multiple periods?
- A stock is modeled as a binomial random variable where each day the probability of an up move is 0.6, with independent days. The probability…
- Holding the expected return and standard deviation of a portfolio constant, an investor raises the minimum acceptable return from 2% to 4%. …