Normal distribution

Definition

A normal distribution is a bell-shaped curve where most of the data points cluster around the mean, and probabilities for values taper off symmetrically towards both extremes. It is characterized by its mean and standard deviation.

5 Must Know Facts For Your Next Test

1. In finance, returns on investments often follow a normal distribution.
2. The mean, median, and mode of a normal distribution are all equal.
3. Approximately 68% of data in a normal distribution falls within one standard deviation of the mean.
4. The tails of a normal distribution extend infinitely without touching the horizontal axis.
5. Standardizing data with z-scores allows comparisons across different normal distributions.

Review Questions

• What percentage of data falls within two standard deviations from the mean in a normal distribution?
• How do the mean, median, and mode compare in a normal distribution?
• Why is the concept of z-scores important when dealing with normal distributions?

Related terms

standardDeviation: A measure that quantifies the amount of variation or dispersion in a set of data values.

mean: The average value obtained by dividing the sum of all values by their number.

zScore: A statistical measurement that describes a value's relation to the mean of a group of values measured in terms of standard deviations.