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. Kurtosis

    A statistical measure used to describe the distribution of observed ...
  2. Random Walk Theory

    The theory that stock price changes have the same distribution ...
  3. Probability Distribution

    A statistical function that describes all the possible values ...
  4. Normal Distribution

    A probability distribution that plots all of its values in a ...
  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. 5 Ways To Measure Mutual Fund Risk
    Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

  2. Find The Highest Returns With The Sharpe ...
    Bonds & Fixed Income

    Find The Highest Returns With The Sharpe ...

  3. Using Normal Distribution Formula To ...
    Investing Basics

    Using Normal Distribution Formula To ...

  4. Can Investors Trust Official Statistics?
    Economics

    Can Investors Trust Official Statistics?

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center