medium · FRM Part 1 Quantitative Analysis
If a sample has a very small number of observations (n = 5), why is the distinction between n and n - 1 in the variance formula particularly important?
- The sample variance estimate becomes statistically unstable whenever n is below ten.
- Kurtosis cannot be reliably estimated unless the sample size exceeds thirty total observations.
- The percentage difference between the two divisors is large (20%), causing significant bias.
- Skewness is mathematically constrained to equal exactly zero for any sample smaller than ten observations.
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