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take a valium
>In a message dated 98-08-24 22:25:09 EDT, rjb@xxxxxxxxxxxxxxxxxxx writes:
>
><<
> >so... when somebody is talking about a value that is 3 standard deviations
> >from the average, the z-score would be 3
> >
> >Nothing magical about it at all.
>
> Nothing magical, but let's be precise. If the value is ABOVE the average
> its z-score is 3. If the value is BELOW the average, then its z-score would
> be -3
> >>
>
>
>Gee rjb,
>
>Since I didn't indicate in my response if it was above or below, nor left nor
>to the right of the average score, I would have thought it would have been
>intuitively obvious that the direction from the average must be taken into
>consideration and that is the primary purpose of the + or - sign.
>
>So if it makes you any happier and to clear up any confusion concerning
>preciseness, if the observed value is 3 standard deviations to the LEFT of the
>population average, then the the Z score is a minus 3. If it is 3 standard
>deviations to the RIGHT of the population average then it would be a + 3.
>Unless of course you are using the Y-axis as your scale then the reference
>values would be rotated accordingly.
>
>In addition, don't forget to do the appropriate tests for normality on the
>data using the skewness and kurtosis testing methodologies, and if the tests
>for normality fail, perform the appropriate adjustments to your z score
>calculations to avoid false probability assessments.
>
>
> Don't forget to take into consideration that the population average can never
>be truly known for an infinite data set so it might be more appropriate to
>use a student's t distribution for your probability estimates correcting of
>course for the apppropriate degrees of freedom based on the sample size
>employed and the number of estimates derived from the sample data for the
>population parameters. Additional adjustment will need to be made if it is
>determined that the underlying distribution has failed the tests for normality
>and the use of the Gaussian distribution model is deemed inappropriate.
>
>
>Is that precise enough?
>
>Also is it safe to assume you DO know how to handle the necessary adjustments
>when it is detemined the underlying distribution is NOT normal?
>
>
>All the best,
>
>Terry Quinn.
>
>
>P.S. For the record. the x-bar indicator I previously supplied to this forum
>does in fact take these issues into account in their construction.
>
>In addition, Those of you who may be trying them on intraday charts where the
>time interval is less than 10 minutes, are most likely seeing a whipsaw
>effect.
>
>That is because the underlying assessment for statistical independence used
>in their construction fails for price date plotted on an interval of less than
>10 minutes.
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