Quantitative Methods Q86
- Option : C
- Explanation : The analyst is using an ordinal scale which involves sorting data into categories that are ordered with respect to some characteristic, such as the firms’ market capitalization value. An example is Standard & Poor’s star ratings for mutual funds. One star represents the group of mutual funds with the worst performance. Similarly, groups with two, three, four and five stars represent groups with increasingly better performance. Nominal scales categorize data but do not rank them. An example would be the classification of mutual funds according to the investment strategy followed – growth fund, value fund, income fund, emerging equity fund etc. Interval scales not only rank data, but also ensure that the differences between scale values are equal. The Celsius and Fahrenheit scales are examples of such scales. However, these scales do not have a true zero.
