AppliedMultiple choice
You compare two execution algorithms on the same orders, measuring slippage for each algorithm on each order. Why use a paired test rather than a two-sample test?
- ABecause paired tests have more degrees of freedom and so always give smaller p-values
- BDifferencing within each order removes order-to-order variation
- CBecause a two-sample test cannot be used when the samples are the same size
- DBecause slippage is not normally distributed and a paired test needs no assumptions
The worked solution is in Premium
The answer, the full working and the one idea to take away – for this and all 1,322 questions in the bank. Answer it in practice and your working is marked, with a known mistake named when you make one.
Learn the method
More statistics and inference questions
- A strategy averaged 0.05% a day with a daily standard deviation of 1% over 252 days.Foundation
- Is the Sharpe ratio real?, part 1 of 3Foundation
- You lower your significance level from 5% to 1% without changing the sample. What happens?Applied
- A die is rolled 60 times, giving counts 5,8,9,8,10,20 for faces one to six.Applied
- A two-sided test at α = 5% compares two arms of 64 with a true standardised effect of 0.5.Advanced
- Is the Sharpe ratio real?, part 3 of 3Advanced