honeycfa

The practice of repeatedly using the same database to search for patterns until one is found is called:

A) data snooping.

B) sample selection bias.

C) data mining.

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The practice of data mining involves analyzing the same data so as to detect a pattern, which may not replicate in other data sets, also known as torturing the data until it confesses.

honeycfa

A research paper that reports finding a profitable trading strategy without providing any discussion of an economic theory that makes predictions consistent with the empirical results is most likely evidence of:

A) a sample that is not large enough.

B) data mining.

C) a non-normal population distribution.

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Data mining occurs when the analyst continually uses the same database to search for patterns or trading rules until he finds one that works. If you are reading research that suggests a profitable trading strategy, make sure you heed the following warning signs of data mining:

Evidence that the author used many variables (most unreported) until he found ones that were significant.

The lack of any economic theory that is consistent with the empirical results.

honeycfa

When sampling from a nonnormal distribution with an known variance, which statistic should be used if the sample size is large and if the respective sample size is small?

A) z-statistic; z-statistic.

B) z-statistic; not available.

C) t-statistic; t-statistic.

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When you are sampling from a:	and the sample size is small, use a:	and the sample size is large, use a:
Normal distribution with a known variance	z-statistic	z-statistic
Normal distribution with an unknown variance	t-statistic	t-statistic*
Nonnormal distribution with a known variance	not available	z-statistic
Nonnormal distribution with an unknown variance	not available	t-statistic*

*The z-statistic is theoretically acceptable here, but use of the t-statistic is more conservative.

honeycfa

Which of the following statements about sample statistics is least accurate?

A) There is no sample statistic for non-normal distributions with unknown variance for either small or large samples.

B) The z-statistic is used to test normally distributed data with a known variance, whether testing a large or a small sample.

C) The z-statistic is used for nonnormal distributions with known variance, but only for large samples.

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There is no sample statistic for non-normal distributions with unknown variance for small samples, but the t-statistic is used when the sample size is large.