Resampling is a process of sampling from the observations in a sample in order to obtain estimates and confidence intervals for population parameters without providing assumptions about the form of population distribution.
METHODS OF RESAMPLING
The resampling methods include –
Permutation methods – With the help of permutation methods all the observed scores are randomly distributed into N1 and N2 to calculate a statistic of interest, such as the difference between the means and the medians. For example, if we randomly divide the nine observed scores into two groups of four and five, the result will be that if it is done hundred or ten thousand times, then the result will be a distribution of observed values in a statistic interest. Randomization tends to generate the sampling distribution for any statistic of interest without making assumptions about the shape or other parameters of population distribution.
Bootstrapping method – When a researcher provides the data, then the statistic of the data is calculated. The variable of the statistic is known but the statistic is known. The bootstrap is the method which creates a large number of datasets and also the statistic on the provided datasets. For example there are 251 daily returns in the year. One bootstrap sample is 251 randomly sampled daily returns.
Permutations method – Permutations tests are restricted to the cases where we have the hypothesis which are null are actually null i.e. that there is no effect. The test does a regression with the squared returns as the response and some number of lags of the squared returns as explanatory variables. So once we have the explanatory matrix then the regression is done and statistic is formed which is required.
Monte Carlo method –In Monte Carlo method a model is prepared using the given data mechanism that is a model of process you wish to understand, produce new samples and examine the results of those samples.
Cross validation method – Models should be tested with data that are not used to fit the model. If you have enough data, the best way is to hold back the random portion of the data to use for testing. Cross validation is a trick in which to get out of the sample tests but still use all the data. It is most often used on the basis of predictions.
RATIONALE OF SUPPORTING RESAMPLING
This is how we can explain resampling in detail along with its different properties mentioned above.
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