DEFINITION of 'Central Limit Theorem  CLT'
A statistical theory that states that given a sufficiently large sample size from a population with a finite level of variance, the mean of all samples from the same population will be approximately equal to the mean of the population. Furthermore, all of the samples will follow an approximate normal distribution pattern, with all variances being approximately equal to the variance of the population divided by each sample's size.
INVESTOPEDIA EXPLAINS 'Central Limit Theorem  CLT'
This statistical theory is very useful when examining returns for a given stock or index because it simplifies many analysis procedures. An appropriate sample size depends on the data available, but generally speaking, having a sample size of at least 50 observations is sufficient. Due to the relative ease of generating financial data, it is often easy to produce much larger sample sizes.

Variance
The spread between numbers in a data set, measuring Variance ... 
Normal Distribution
A probability distribution that plots all of its values in a ... 
Probability Distribution
A statistical function that describes all the possible values ... 
Sampling Error
A statistical error to which an analyst exposes a model simply ... 
NonSampling Error
A statistical error caused by human error to which a specific ... 
Binomial Distribution
A probability distribution that summarizes the likelihood that ...

What is a relative standard error?
In statistics, a relative standard error, or RSE, is equal to the standard error of a survey estimate divided by the survey ... Read Full Answer >> 
What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >> 
What is the utility function and how is it calculated?
In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >> 
What are some of the more common types of regressions investors can use?
The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >> 
What types of assets produce negative portfolio variance?
Assets that have a negative correlation with each other produce negative portfolio variance. Variance is one measure of the ... Read Full Answer >> 
When is it better to use systematic over simple random sampling?
Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>

Fundamental Analysis
Find The Right Fit With Probability Distributions
Discover a few of the most popular probability distributions and how to calculate them. 
Mutual Funds & ETFs
5 Ways To Measure Mutual Fund Risk
These statistical measurements highlight how to mitigate risk and increase rewards. 
Options & Futures
An Introduction To Value at Risk (VAR)
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Fundamental Analysis
Monte Carlo Simulation With GBM
Learn to predict future events through a series of random trials. 
Economics
What's a Centrally Planned Economy?
A centrally planned economy is one where the government controls the country’s supply and demand of goods and services. 
Economics
What are Barriers to Entry?
A barrier to entry is any obstacle that restricts or impedes a company’s efforts to enter an industry. 
Mutual Funds & ETFs
ETF Analysis: SPDR S&P 500 Trust
Find out more about the SPDR S&P 500 ETF Trust, the characteristics of the exchange traded fund and the suitability of investing in the fund. 
Mutual Funds & ETFs
ETF Analysis: Energy Select Sector SPDR
Find out more about the Energy Select Sector SPDR Fund, the top holdings of this exchangetraded fund and the characteristics of the fund. 
Investing News
The Financial Singularity Will Destroy Your Return
Given the current and future growth of financial technology, many believe algorithms will soon define what drives market outcomes. With a wealth of big data, algorithms would be able to create ... 
Economics
Explaining the Liquidity Coverage Ratio
The liquidity coverage ratio requires banks and other financial institutions to hold enough cash and liquid assets on hand to weather market stress.