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Why is Normal Distribution is so used in any financial phenomenon?
Wiki User
∙ 14y ago
Because each phenomenon is made up of many smaller phenomena which are often independent, each of which has a random element associated with it. The sum of such random variations tends towards the Gaussian (normal) distribution. Also, the distribution has well known properties.
Wiki User
∙ 14y ago
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Can normal distribution be used if the data is not normal?
You can use a normal distribution to approximate a binomial distribution if conditions are met such as n*p and n*q is > or = to 5 & n >30.
What distribution does the F distribution approach as the sample size increases?
The F distribution is used to test whether two population variances are the same. The sampled populations must follow the normal distribution. Therefore, as the sample size increases, the F distribution approaches the normal distribution.
Why does a researcher want to go from a normal distribution to a standard normal distribution?
A researcher wants to go from a normal distribution to a standard normal distribution because the latter allows him/her to make the correspondence between the area and the probability. Though events in the real world rarely follow a standard normal distribution, z-scores are convenient calculations of area that can be used with any/all normal distributions. Meaning: once a researcher has translated raw data into a standard normal distribution (z-score), he/she can then find its associated probability.
What is the z value for a normal distribution?
If a random variable X has a Normal distribution with mean m and standard deviation s, then z = (X - m)/s has a Standard Normal distribution. That is, Z has a Normal distribution with mean 0 and standard deviation 1. Probabilities for a general Normal distribution are extremely difficult to obtain but values for the Standard Normal have been calculated numerically and are widely tabulated. The z-transformation is, therefore, used to evaluate probabilities for Normally distributed random variables.
What does it mean normal distribution?
The Normal distribution is a probability distribution of the exponential family. It is a symmetric distribution which is defined by just two parameters: its mean and variance (or standard deviation. It is one of the most commonly occurring distributions for continuous variables. Also, under suitable conditions, other distributions can be approximated by the Normal. Unfortunately, these approximations are often used even if the required conditions are not met!
What is symmetrical normal distribution?
The Normal distribution is, by definition, symmetric. There is no other kind of Normal distribution, so the adjective is not used.
Can normal distribution be used if the data is not normal?
You can use a normal distribution to approximate a binomial distribution if conditions are met such as n*p and n*q is > or = to 5 & n >30.
In a perfectly symmetrical bell-shaped normal distribution?
Normal distribution is a perfectly symmetrical bell-shaped normal distribution. The bell curve is used to find the median, mean and mode of a function.
If the paired difference's are normal in a test of mean difference's then the distribution used for testing is the?
If the paired differences are normal in a test of mean differences, then the distribution used for testing is the
Why you prefer normal distribution over other distributions in statistics?
we prefer normal distribution over other distribution in statistics because most of the data around us is continuous. So, for continuous data normal distribution is used.
What is the application of normal distribution curve in quality control?
If the underlying distribution of the product is normally distributed then (and only then) the normal distribution can be used to identify specimens that are outside the acceptable range.
Why you prefer normal distribution for other?
It is probably the most widely used distribution in statistics. In addition, a lot of information exists on this distribution.
Why normal distribution is better than other distributions?
It may not be better, but there is a lot of information on the normal distribution. It is one of the most widely used in statistics.
What distribution does the F distribution approach as the sample size increases?
The F distribution is used to test whether two population variances are the same. The sampled populations must follow the normal distribution. Therefore, as the sample size increases, the F distribution approaches the normal distribution.
Why the normal distribution can be used as an approximation to the binomial distribution?
The central limit theorem basically states that for any distribution, the distribution of the sample means approaches a normal distribution as the sample size gets larger and larger. This allows us to use the normal distribution as an approximation to binomial, as long as the number of trials times the probability of success is greater than or equal to 5 and if you use the normal distribution as an approximation, you apply the continuity correction factor.
Why does a researcher want to go from a normal distribution to a standard normal distribution?
A researcher wants to go from a normal distribution to a standard normal distribution because the latter allows him/her to make the correspondence between the area and the probability. Though events in the real world rarely follow a standard normal distribution, z-scores are convenient calculations of area that can be used with any/all normal distributions. Meaning: once a researcher has translated raw data into a standard normal distribution (z-score), he/she can then find its associated probability.
What is the relationship between the Z-score for Normal Distribution and Continuous Probability?
There is no real relationship. Probabilities for the Normal distribution are extremely difficult to work out. The z-score is a method used to convert any Normal distribution into the Standard Normal distribution so that its probabilities can be looked up in tables easily. There are infinitely many types of continuous probability distributions and the Normal is just one of them.
