CFA CFA Level 1 Question of the Week – Quantitative Methods

Question of the Week – Quantitative Methods

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    • AdaptPrep
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      Which of the following methods can be used to overcome the data mining bias?

      • Test hundreds of variables for statistical significance
      • Use data sets created by previous research
      • Test the predictions on new data
    • AdaptPrep
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      If you test 100 variables for
      predictors with 95% confidence, you would expect 5 of those variables to appear
      as predictors even if there is no relationship with the data. The problem, not
      the solution, is that hundreds of variables are being tested for statistical
      significance. Another data mining issue (intergenerational data mining) can
      come about because a researcher uses another researcher’s data. A solution to
      both problems involves testing the conclusions
      on a new data set
      .

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