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.

BREAKING DOWN '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. Random Factor Analysis

    A statistical analysis performed to determine the origin of random ...
  2. Data Smoothing

    The use of an algorithm to remove noise from a data set, allowing ...
  3. Simple Random Sample

    A subset of a statistical population in which each member of ...
  4. Random Variable

    A variable whose value is unknown or a function that assigns ...
  5. Log-Normal Distribution

    A statistical distribution of random variables which have a normally ...
  6. Random Walk Theory

    The theory that stock price changes have the same distribution ...
Related Articles
  1. Trading

    Random Reinforcement: Why Most Traders Fail

    This phenomenon can cause a trader to abandon a proven strategy or risk everything on chance. Find out how to avoid it.
  2. Investing

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  3. Investing

    Financial Markets: Random, Cyclical Or Both?

    Are the markets random or cyclical? It depends on who you ask. Here, we go over both sides of the argument.
  4. Investing

    Understanding the Random Walk Theory

    The random walk theory states stock prices are independent of other factors, so their past movements cannot predict their future.
  5. Investing

    What Are The Odds Of Scoring A Winning Trade?

    Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why.
  6. Investing

    Viewing The Market As Organized Chaos

    Find out how a cat and a ladybug prove markets are both random and efficient.
  7. Investing

    Monte Carlo Simulation With GBM

    Learn to predict future events through a series of random trials.
  8. Investing

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
  9. Investing

    Scenario Analysis Provides Glimpse Of Portfolio Potential

    This statistical method estimates how far a stock might fall in a worst-case scenario.
  10. Investing

    Intro to Stationary and Non-Stationary Processes

    Refining data points is the key to applying financial series time data to stock analysis.
RELATED FAQS
  1. What is the "random walk theory" and what does it mean for investors?

    The random walk theory is the occurrence of an event determined by a series of random movements - in other words, events ... Read Answer >>
  2. What are the best selection methods for creating a simple random sample?

    Discover some of the methods that researchers and pollsters utilize to select a simple random sample from a population group ... Read Answer >>
  3. What are the advantages of using a simple random sample to study a larger population?

    Learn how simple random sampling works and what advantages it offers over other sampling methods when selecting a research ... Read Answer >>
  4. What are some examples of stratified random sampling?

    Learn what simple random sampling and stratified random sampling are, some examples of stratified random samples, and how ... Read Answer >>
  5. When is it better to use systematic over simple random sampling?

    Learn when systematic sampling is better than simple random sampling, such as in the absence of data patterns and when there ... Read Answer >>
  6. What is the criteria for a simple random sample?

    Discover the criterion for taking a simple random sample, in contrast to a systematic random sample, each person selected ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center