What is Lognormal Distribution?
The lognormal distribution is a way to describe the likelihood of different values for a variable. This variable has a special property; if logarithm (log) is taken as its value, those log values follow a normal distribution. In layman’s language, if we have a variable X that follows a lognormal distribution, then if we take the natural logarithm (ln) of X, we’ll get a normal distribution. If X has a lognormal distribution with parameters μ and σ, then, X ~ log N (μ,σ2).
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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