3. Probability Distributions

Distribution Fitting — Quiz

Test your understanding of distribution fitting with 5 practice questions.

Practice Questions

Question 1

When comparing two nested statistical models, where one is a special case of the other, which test is commonly used to determine if the more complex model provides a significantly better fit than the simpler model?

Question 2

In the context of distribution fitting, what is the primary advantage of using the Akaike Information Criterion (AIC) or Bayesian Information Criterion (BIC) over traditional hypothesis tests for model selection?

Question 3

A financial analyst is modeling the daily returns of a stock. Due to the presence of 'fat tails' (more extreme values than expected under normality) and skewness often observed in financial data, which distribution might be a more robust choice than the Normal distribution?

Question 4

In the context of distribution fitting, what is the primary role of the method of moments (MOM) for parameter estimation?

Question 5

When evaluating the goodness-of-fit for a discrete distribution using a Chi-square test, what is the appropriate way to handle categories with very low expected frequencies?