Bavaria is known for its famous Oktoberfest… and within Germany also for its presumably difficult Abitur, a qualification granted by university-preparatory schools in Germany.
A mandatory part for all students is maths. This year many students protested that the maths part was way too hard, they even started an online petition with more than seventy thousand supporters at this time of writing!
It is not clear yet whether their marks will be adjusted upwards, the ministry of education is investigating the case. As a professor in Bavaria who also teaches statistics I will take the opportunity to share with you an actual question from the original examination with solution, so read on…
Continue reading “Was the Bavarian Abitur too hard this time?”
R is one of the best choices when it comes to quantitative finance. Here we will show you how to load financial data, plot charts and give you a step-by-step template to backtest trading strategies. So, read on…
Continue reading “Backtest Trading Strategies Like a Real Quant”
Tomorrow, on the First of May, many countries celebrate the so called International Workers’ Day (or Labour Day): time to talk about the unequal distribution of wealth again, so read on!
Continue reading “The Rich didn’t earn their Wealth, they just got Lucky”
Like most people, you will have used a search engine lately, like Google. But have you ever thought about how it manages to give you the most fitting results? How does it order the results so that the best are on top? Read on to find out!
Continue reading “Google’s Eigenvector, or How a Random Surfer Finds the Most Relevant Webpages”
In this post we are talking about one of the most unintuitive results in statistics: the so called false positive paradox which is an example of the so called base rate fallacy. It describes a situation where a positive test result of a very sensitive medical test shows that you have the respective disease… yet you are most probably healthy!
Continue reading “Base Rate Fallacy – or why No One is justified to believe that Jesus rose”
One of the problems of navigating an autonomous car through a city is to extract robust signals in the face of all the noise that is present in the different sensors. Just taking something like an arithmetic mean of all the data points could possibly end in a catastrophe: if a part of a wall looks similar to the street and the algorithm calculates an average trajectory of the two this would end in leaving the road and possibly crashing into pedestrians. So we need some robust algorithm to get rid of the noise. The area of statistics that especially deals with such problems is called robust statistics and the methods used therein robust estimation.
Continue reading “Separating the Signal from the Noise: Robust Statistics for Pedestrians”
A few weeks ago we published a post about using the power of the evolutionary method for optimization (see Evolution works!). In this post we will go a step further, so read on…
Continue reading “Symbolic Regression, Genetic Programming… or if Kepler had R”
Asset returns have certain statistical properties, also called stylized facts. Important ones are:
- Absence of autocorrelation: basically the direction of the return of one day doesn’t tell you anything useful about the direction of the next day.
- Fat tails: returns are not normal, i.e. there are many more extreme events than there would be if returns were normal.
- Volatility clustering: basically financial markets exhibit high-volatility and low-volatility regimes.
- Leverage effect: high-volatility regimes tend to coincide with falling prices and vice versa.
Continue reading “Inverse Statistics – and how to create Gain-Loss Asymmetry plots in R”
As promised in the post Learning Data Science: Modelling Basics we will now go a step further and try to predict income brackets with real world data and different modelling approaches. We will learn a thing or two along the way, e.g. about the so-called Accuracy-Interpretability Trade-Off, so read on…
Continue reading “Learning Data Science: Predicting Income Brackets”
In this post, we will see that a little bit of simple R code can go a very long way! So let’s get started!
Continue reading “Learning R: The Collatz Conjecture”