reviewing your stats lecture. I think I have a grasp of what you are lecturing here few bits and pieces coming back to me from school. But can you please explain a bit further on the following:
You must understand the difference between a distribution of returns and a sample distribution.
Thank you,
Patrick
Hi Patrick
The difference is what was used to make up the distribution.
In a distribution of returns, we are taking all the returns we got from our test (or real life Portfolio) and grouping the returns into bins. We’d call this descriptive statistics because it is describing what happened.
In a sample distribution, we are pulling out a random set of data from the population, measuring it, and putting the results in a distribution. Based on what we see, we “infer” what we expect to be true for the whole population. We call the inferential statistics because we are inferring that or results apply to the population.
Hope that helps
Mathew