Runs Test

AAA

DEFINITION of 'Runs Test'

A statistical procedure that examines whether a string of data is occurring randomly given a specific distribution. The runs test analyzes the occurrence of similar events that are separated by events that are different.

INVESTOPEDIA EXPLAINS 'Runs Test'

For example, a list of truly random single-digit numbers should only have a few instances where a sequence of numbers is ascending numerically. However, in many cases, it is difficult to assert the randomness of data in which there are thousands of sequences in a string of data, so the runs test was created as an objective method of determining randomness.

The runs test model is important in determining whether an outcome of a trial is truly random, especially in cases where random versus sequential data has implications for subsequent theories and analysis.

RELATED TERMS
  1. Normal Distribution

    A probability distribution that plots all of its values in a ...
  2. Probability Distribution

    A statistical function that describes all the possible values ...
  3. Random Walk Theory

    The theory that stock price changes have the same distribution ...
  4. Kurtosis

    A statistical measure used to describe the distribution of observed ...
  5. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
  6. Mean-Variance Analysis

    The process of weighing risk against expected return. Mean variance ...
Related Articles
  1. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  2. Bonds & Fixed Income

    Find The Highest Returns With The Sharpe Ratio

    Learn how to follow the efficient frontier to increase your chances of successful investing.
  3. Economics

    What are some limitations of the consumer price index (CPI)?

    Explore some of the basic limitations of the widely used economic indicator, the consumer price index, or CPI, and examine the criticism of its accuracy.
  4. Economics

    Is the consumer price index (CPI) a cost of living index?

    Explore the consumer price index (CPI) and understand why it is not an actual cost of living index although it is often identified as one.
  5. Economics

    Where do funds report their r-squared?

    Learn where to find R-squared calculations for mutual funds. Explore R-squared, Alpha and Beta and how these calculations measure securities' performance.
  6. Fundamental Analysis

    How do you calculate r-squared in Excel?

    Calculate R-squared in Microsoft Excel by creating two data ranges to correlate. Use the Correlate formula to correlate both sets of data, or x and y.
  7. Fundamental Analysis

    What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns.
  8. Trading Strategies

    How far back in a stock's history should you go when gauging its volatility?

    Discover why it can be difficult for investors to figure out how far back to go into a stock's history when gauging its volatility.
  9. Trading Strategies

    What are common examples of Serial Correlation in finance?

    Take a deeper look at serial correlation in finance, and find out why most attempts at discovering serial correlation among asset prices have failed.
  10. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center