In the continuous case, it is areas under the curve that define the probabilities. That is:. Breadcrumb Home 14 Font size. Font family A A. Content Preview Arcu felis bibendum ut tristique et egestas quis: Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris Duis aute irure dolor in reprehenderit in voluptate Excepteur sint occaecat cupidatat non proident. Lorem ipsum dolor sit amet, consectetur adipisicing elit. Odit molestiae mollitia laudantium assumenda nam eaque, excepturi, soluta, perspiciatis cupiditate sapiente, adipisci quaerat odio voluptates consectetur nulla eveniet iure vitae quibusdam?
Excepturi aliquam in iure, repellat, fugiat illum voluptate repellendus blanditiis veritatis ducimus ad ipsa quisquam, commodi vel necessitatibus, harum quos a dignissimos. Close Save changes. Help F1 or? Example Section. Your Practice. Popular Courses. Financial Analysis How to Value a Company. What Is a Probability Distribution? Key Takeaways A probability distribution depicts the expected outcomes of possible values for a given data generating process.
Probability distributions come in many shapes with different characteristics, as defined by the mean, standard deviation, skewness, and kurtosis. Investors use probability distributions to anticipate returns on assets such as stocks over time and to hedge their risk.
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Investopedia does not include all offers available in the marketplace. Related Terms Normal Distribution Normal distribution is a continuous probability distribution wherein values lie in a symmetrical fashion mostly situated around the mean.
Log-Normal Distribution A log-normal distribution is a statistical distribution of logarithmic values from a related normal distribution. How Binomial Distribution Works The binomial distribution is a probability distribution that summarizes the likelihood that a value will take one of two independent values. What Is a Bell Curve? A bell curve describes the shape of data conforming to a normal distribution.
Mesokurtic Mesokurtic is a statistical term describing the shape of a probability distribution. Discover more about mesokurtic distributions here. Understanding T Distribution A T distribution is a type of probability function that is appropriate for estimating population parameters for small sample sizes or unknown variances.
Partner Links. Related Articles. Investopedia is part of the Dotdash publishing family. A discrete probability function is a function that can take a discrete number of values not necessarily finite. This is most often the non-negative integers or some subset of the non-negative integers. There is no mathematical restriction that discrete probability functions only be defined at integers, but in practice this is usually what makes sense.
Each of the discrete values has a certain probability of occurrence that is between zero and one. That is, a discrete function that allows negative values or values greater than one is not a probability function.
The condition that the probabilities sum to one means that at least one of the values has to occur. The mathematical definition of a continuous probability function, f x , is a function that satisfies the following properties.
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