What is the 'Central Limit Theorem  CLT'
The central limit theorem (CLT) is 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.
BREAKING DOWN '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 ... 
Sampling Error
A statistical error to which an analyst exposes a model simply ... 
Probability Distribution
A statistical function that describes all the possible values ... 
NonSampling Error
A statistical error caused by human error to which a specific ... 
Binomial Distribution
A probability distribution that summarizes the likelihood that ...

Fundamental Analysis
Explaining the Central Limit Theorem
Central limit theorem is a fundamental concept in probability theory. 
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
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. 
Fundamental Analysis
Monte Carlo Simulation With GBM
Learn to predict future events through a series of random trials. 
Markets
Negative Interest Rates Require Flexibility in Fixed Income
Here’s a quick look at four charts showing just a few of the interrelated ways the global fixed income markets have dramatically changed over the last seven years. 
Economics
Understanding Game Theory
Game theory is a model for making decisions that weighs the benefits of a choice along with the interaction between participants. 
Investing
How to Prepare for the Low Return Environment Ahead
Learn about the big takeaway from this week’s chart: Investors aiming for higher returns over the next five years should be prepared to stomach more volatility. 
Economics
Understanding Imperfect Competition
Imperfect competition appears in several different forms. Markets are evaluated by how they compare to, and try to approach, perfect competition. 
Investing
What Happens to Bond ETFs in Stressed Markets?
We are going to dive a little deeper today at how bond exchange traded funds (ETFs) fare when the markets are stressed.

What is a relative standard error?
Find out how to distinguish between mean, standard deviation, standard error and relative standard error in statistical survey ... Read Answer >> 
What is finance?
"Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Answer >> 
What is the difference between positive and normative economics?
Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Answer >> 
Do plane tickets get cheaper closer to the date of departure?
Read about when to buy flights. See how statistics can predict optimal pricing. Read about price volatility over time. Learn ... Read Answer >> 
Is Colombia an emerging market economy?
Learn the definition of an emerging market economy, and understand how Colombia, while not yet developed, meets the standards ... Read Answer >> 
What assumptions are made when conducting a ttest?
Learn what a ttest is, and discover the five standard assumptions that are made regarding the validity of sampling and data ... Read Answer >>