Session 3: Quantitative Methods: Application Reading 10: Sampling and Estimation
LOS b: Distinguish between simple random and stratified random sampling.
An equity analyst needs to select a representative sample of manufacturing stocks. Starting with the population of all publicly traded manufacturing stocks, she classifies each stock into one of the 20 industry groups that form the Index of Industrial Production for the manufacturing industry. She then selects a number of stocks from each industry based on its weight in the index. The sampling method the analyst is using is best characterized as:
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B) |
stratified random sampling. | |
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In stratified random sampling, a researcher classifies a population into smaller groups based on one or more characteristics, takes a simple random sample from each subgroup based on the size of the subgroup, and pools the results. |