DEFINITION of 'Normal Distribution'
A probability distribution that plots all of its values in a symmetrical fashion and most of the results are situated around the probability's mean. Values are equally likely to plot either above or below the mean. Grouping takes place at values that are close to the mean and then tails off symmetrically away from the mean.
Also known as a "Gaussian distribution" or "bell curve".
INVESTOPEDIA EXPLAINS 'Normal Distribution'
The normal distribution is the most common type of distribution, and is often found in stock market analysis. Given enough observations within a sample size, it is reasonable to make the assumption that returns follow a normally distributed pattern, but this assumption can be disproved.
As with any distribution, the distributions mean, skewness and kurtosis coefficients should be calculated in order to determine the type of distribution you may be dealing with.

Leptokurtic
A statistical distribution where the points along the Xaxis ... 
Platykurtic
A type of statistical distribution where the points along the ... 
Skewness
Describe asymmetry from the normal distribution in a set of statistical ... 
Mean
The simple mathematical average of a set of two or more numbers. ... 
Covariance
A measure of the degree to which returns on two risky assets ... 
Kurtosis
A statistical measure used to describe the distribution of observed ...

What is RiskMetrics in Value at Risk (VaR)?
RiskMetrics is a methodology that contains techniques and data sets used to calculate the value at risk (VaR) of a portfolio ... 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 >> 
What are some common financial sampling methods?
There are two areas in finance where sampling is very important: hypothesis testing and auditing. The type of sampling methods ... Read Full Answer >>

Markets
The Uses And Limits Of Volatility
Check out how the assumptions of theoretical risk models compare to actual market performance. 
Forex Education
Trading With Gaussian Models Of Statistics
The entire study of statistics originated from Gauss and allowed us to understand markets, prices and probabilities, among other applications. 
Active Trading Fundamentals
How To Convert Value At Risk To Different Time Periods
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
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
A DisasterProtection Plan For Your Portfolio
If you can't predict the future, you'll need to plan ahead to protect your assets from the impact of major world events. 
Fundamental Analysis
Monte Carlo Simulation With GBM
Learn to predict future events through a series of random trials. 
Mutual Funds & ETFs
Stock Market Risk: Wagging The Tails
The bell curve is an excellent way to evaluate stock market risk over the long term. 
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. 
Fundamental Analysis
Calculating Valuation
Valuation is the process of determining what an asset is worth.