Chapter 3 · Section 2 practice

Uncertainty and Backtest Evidence

0 of 5 answered

These questions review the examples in the companion slides. Choose an answer, then check the explanation.

Question 1

How should a bootstrap preserve short runs of dependent monthly observations?

  • Shuffle every stock-month independently
  • Sample contiguous time blocks
  • Replace pending returns with zero
  • Duplicate the best month

Question 2

Must a block-bootstrap interval always be wider than an iid interval?

  • Yes, by definition
  • Yes, for every trading sample
  • No; it depends on the dependence and sample
  • No; intervals never depend on dependence

Question 3

A 95% confidence interval for mean net return contains zero. What follows?

  • The method and sample do not establish a non-zero mean at that confidence level
  • The true mean is exactly zero
  • The strategy must lose money
  • The accounting must be wrong

Question 4

What does HAC change in an intercept-only regression?

  • The realised returns
  • The accounting fees
  • The sample mean
  • The estimated covariance and uncertainty

Question 5

What does 95% coverage of a confidence-interval procedure mean?

  • 95% of future returns lie inside each interval
  • The observed sample mean has a 95% chance of being correct
  • Across repeated samples, about 95% of constructed intervals contain the fixed population mean
  • 95% of tested strategies are profitable