Financial Risk Manager Part 1
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In which of the following situations would bootstrapping be ineffective?
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NNikitesh
A
Use of non-independent data
B
Sampling with replacement
C
If there are no outliers in the data
D
Re-sampling from regression residuals
Explanation:
Bootstrapping implicitly assumes that the data are independent of one another. Therefore, if there are correlations in the data (non-independent data), bootstrapping would be ineffective. Bootstrapping involves sampling with replacement from the original dataset, which is actually a fundamental aspect of the method, not a situation where it would be ineffective. The presence or absence of outliers doesn't directly affect bootstrapping's effectiveness. Re-sampling from regression residuals is a valid application of bootstrapping in regression analysis.
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