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Questions and Answers
What is the primary purpose of Exploratory Data Analysis (EDA) in finance?
Which visual representation is NOT commonly used in EDA for finance?
Which of the following describes the 'median' in descriptive statistics?
What role does standard deviation play in financial EDA?
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How does EDA assist in handling missing data?
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Which statement best describes an outlier in financial data analysis?
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Which of the following is NOT a common tool for visualizing financial data in EDA?
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In correlation analysis, what does a high correlation between two stocks indicate?
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Study Notes
Exploratory Data Analysis (EDA)
- EDA in finance is like getting to know your financial data, to understand patterns and characteristics.
- EDA is the first step to make decisions about further analysis and find insights.
Visualizing the Data
- EDA uses graphs and charts like line charts, histograms, and scatter plots to see trends and changes over time.
- For example, you can plot stock prices over 10 years to see patterns like uptrends, downtrends, and periods of volatility.
- Boxplots and histograms help visualize how data is spread out, for example, how often stock prices are high or low, and if there are any unusual jumps.
Descriptive Statistics
- These are basic calculations that help understand the main features of data:
- Mean: The average value
- Median: The middle value, helpful when data has outliers
- Standard Deviation: Measures how spread out the data is, in finance it can help measure risk or volatility
- Correlation: Shows how different financial variables move together, for example, observing whether two stocks rise or fall at the same time.
Handling Missing Data
- Sometimes, there is missing information in the dataset.
- EDA helps to identify these gaps and decide how to address them: remove, replace, or fill in with an estimate.
Identifying Outliers
- Outliers are values significantly different from the rest, like a stock price suddenly jumping by 50% in a day.
- EDA helps to spot these, which can affect analysis and predictions.
Factors Affecting Stock Prices
- Various factors can influence stock prices, such as:
- Interest rates
- Inflation
- Company earnings
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Description
This quiz focuses on the basics of Exploratory Data Analysis (EDA) specifically in the finance sector. It covers key concepts like visualizing data trends, descriptive statistics, and the importance of understanding data patterns for making informed financial decisions. Test your knowledge on how EDA can help uncover insights from financial data.
