- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 13. Parametric and Non-Parametric Tests

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**CFA Practice Question**

Which of the following would not be an example that would require a nonparametric test?

A. The variances between two sets of population need to be tested in order to determine if they are equal.

B. The data being analyzed is a set of rankings as opposed to actual values for a set of occurrences.

C. The population on which the tests are being conducted is known not to be normally distributed.

**Explanation:**Variance and arithmetic mean are the two most important parameters of a population. Hence, any test involving these two variables would be considered as a parametric test.

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**User Contributed Comments**
4

User |
Comment |
---|---|

Mikehuynh |
Parametric test => parameters: variances, means Nonparametric => no parameters |

Patdotcom |
And, Is C an example that would require nonparametric test? Can anyone explain? |

edrei7 |
Parametric tests are tests that make assumptions about the parameters (e.g. mean, standard deviation, and variance) of the population distribution from which the sample is drawn. C is making an assumption of the population distribution itself, not its parameters. |

edrei7 |
Correction. Another quality of parametric tests is the assumption of normality of the underlying distribution. I guess C being not normally distributed made it the wrong answer. |