Statistics and Econometrics - 9/9

What is important for a loan?

Blog, Miscellaneous, R, Statistics and EconometricsPosted on 11/06/2011

Few months back I read this post, which referred to this amazing data set. The numbers are for individuals who borrowed money, amounts, term and conditions of the loans and much more. Most of the people naturally paid back the loan in full, however, some did not,

OLS beta VS. Robust beta

Blog, Finance and Trading, R, Statistics and EconometricsPosted on 10/03/2011

In financial context, $\beta$ is suppose to reflect the relation between a stock and the general market. A broad based index such as the S&P 500 is often taken as proxy for the general market. The $\beta$, without getting into too much detail, is estimated using the regression: $$stock_i = \beta_0+\beta_1market_i+e_i$$ A $\widehat{\beta_1}$ of say, 1.5 means that when the market goes up 1% the specific stock goes up 1.5%. (Ignoring all the biases at the moment!)