115 CFA
File: Reading 11 - 13. Parametric and Non-Parametric Tests

13. Parametric and Non-Parametric Tests

k. distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests may be appropriate.

What are the two qualities of a parametric test?
A parametric test has two qualities:
1. They make assumptions about a population parameter like mean or variance.
2. The analyst had to make assumptions about the distribution of the population underlying the sample from which test statistics are derived.

How is a parametric test different than a nonparametric test?
The parametric test makes assumptions about populations parameters (e.g. mean, variance) and assumes population distribution. The nonparametric test does not require either of these things and are used only when a parametric test is not appropriate.

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