Question

The statistical method provides a more accurate measure of the worst expected loss at a given confidence level than the percentile method given a normal distribution?

Select one:

True

False

Answer 1

TRUE

REASON :

Normal distribution, also known as the Gaussian distribution, is a probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean. In graph form, normal distribution will appear as a bell curve.

The normal distribution is the most common type of distribution assumed in technical stock market analysis and in other types of statistical analyses. The standard normal distribution has two parameters: the mean and the standard deviation. For a normal distribution, 68% of the observations are within +/- one standard deviation of the mean, 95% are within +/- two standard deviations, and 99.7% are within +- three standard deviations.

The normal distribution model is motivated by the Central Limit Theorem. This theory states that averages calculated from independent, identically distributed random variables have approximately normal distributions, regardless of the type of distribution from which the variables are sampled (provided it has finite variance). Normal distribution is sometimes confused with symmetrical distribution. Symmetrical distribution is one where a dividing line produces two mirror images, but the actual data could be two humps or a series of hills in addition to the bell curve that indicates a normal distribution.