Lognormal Distribution Curve
- It is right-skewed, meaning it tilts to the right.
- The curve begins at zero, rises to its peak, and then declines.
- The degree of skewness increases as the standard deviation (σ) rises, keeping the mean (μ) constant.
- μ represents the mean of natural logarithms of the data.
- σ represents the standard deviation of natural logarithms of the data.
- When σ is much larger than 1, the curve rises steeply at the start, peaks early, and then falls rapidly, resembling an exponential curve.
- In this distribution, μ acts as more of a scale parameter, unlike the normal distribution where it serves as a location parameter.
Lognormal Distribution in Business Statistics
In business statistics, Lognormal Distribution is a crucial probability distribution model as it characterises data with positive values that show right-skewed patterns, which makes it suitable for various real-world scenarios like stock prices, income, resource reserves, social media, etc. Understanding Lognormal Distribution helps in risk assessment, portfolio optimisation, and decision-making in fields, like finance, economics, and resource management.
Table of Content
- Probability Density Function (PDF) of Lognormal Distribution
- Lognormal Distribution Curve
- Mean and Variance of Lognormal Distribution
- Applications of Lognormal Distribution
- Examples of Lognormal Distribution
- Difference Between Normal Distribution and Lognormal Distribution
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