Articles
Calculating Geometric Mean
One problem with arithmetic mean is that it assumes the returns on the investment made at the beginning of each period. ...
Calculating Weighted Average Mean
One characteristic of an arithmetic mean is that all observations have equal weight (=1/N). However, this may not always...
Calculating Arithmetic Mean
Arithmetic mean is the simple average of all observations and is calculated by adding all the observations and dividing ...
Measures of Central Tendency
The measures of central tendency identify what is the center of a data set. These are the most widely used tools among a...
Properties of a Data Set (Histogram / Frequency Polygon)
Histogram The data in a frequency distribution can be presented using a histogram. A histogram is a bar chart with diffe...
Relative Frequencies and Cumulative Relative Frequencies
The data in a frequency distribution can also be presented using relative frequencies. Once we have relative frequenc...
Parameter, Sample Statistic, and Frequency Distribution
Earlier we took an example of measuring the average savings for a group of 100 families. This data of 100 families repre...
Types of Measurement Scales
Depending on the information we want the data to represent, we can choose one of the four measurement scales. Nominal S...
Descriptive Vs. Inferential Statistics
Statistics is the science of analyzing data. When you are presented with the daily closing prices of a stock for the pas...
Convert One Yield to Another
If we have HPY, EAY or MMY, we can use it to convert it to the other two. Continuing with our previous example, let’s...
Money Market Yield
The money market yield, also known as the CD-equivalent yield, allows the quoted yield on a T-bill to be compared with a...
Effective Annual Yield for Money Market Instruments
For a money market instrument such as a T-bill, Effective Annual Yield is the annualized value of the Holding Period Ret...
Holding Period Yield (HPY)
For investments, the Holding Period Yield (HPY) or Holding Period Return (HPR) refers to the total return earned from an...
Bank Discount Yield
T-bills are quoted on a bank discount yield basis. The bank discount yield is calculated using the following formula: ...
Yield Measures for Money Market Instruments
In addition to issuing long term bonds, governments also issue short-term instruments such as Treasury bills (T bills) o...
How to Calculate Annualized Returns
When we make investments, we invest our money in different assets and earn returns for different periods of time. For ex...
Money-weighted Returns
We learned about arithmetic returns and geometric returns. However, the problem with these measures is that they do not ...
Time-weighted Returns
While calculating the returns on financial assets, we will often look at the returns from multiple holding periods. For ...
Holding Period Return (Total Return)
For investments, the Holding Period Return (HPR) refers to the total return earned from an investment or an investment p...
Conflict Between NPV and IRR (And Problem with IRR)
When you are analyzing a single conventional project, both NPV and IRR will provide you the same indicator about whether...
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