T Distribution

AAA

DEFINITION of 'T Distribution'

A type of probability distribution that is theoretical and resembles a normal distribution. A T distribution differs from the normal distribution by its degrees of freedom. The higher the degrees of freedom, the closer that distribution will resemble a standard normal distribution with a mean of 0, and a standard deviation of 1.

The T distribution is also known as the "Student's T Distribution".

INVESTOPEDIA EXPLAINS 'T Distribution'

The use of a T distribution is precluded by the standard deviation of the population parameter being unknown and allows the analyst to approximate probabilities, based on the mean of the sample, the population, the standard deviation of the sample and the sample's degrees of freedom. As the sample's degrees of freedom approaches 50, the T distribution will virtually be identical to the normal distribution.

RELATED TERMS
  1. Degrees Of Freedom

    In statistics, the number of values in a study that are free ...
  2. Acceptance Sampling

    A statistical measure used in quality control. A company cannot ...
  3. Nonparametric Statistics

    A statistical method wherein the data is not required to fit ...
  4. Probability Distribution

    A statistical function that describes all the possible values ...
  5. Non-Sampling Error

    A statistical error caused by human error to which a specific ...
  6. Sampling Error

    A statistical error to which an analyst exposes a model simply ...
Related Articles
  1. Does Your Investment Manager Measure ...
    Personal Finance

    Does Your Investment Manager Measure ...

  2. 5 Ways To Measure Mutual Fund Risk
    Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

  3. Find The Highest Returns With The Sharpe ...
    Bonds & Fixed Income

    Find The Highest Returns With The Sharpe ...

  4. Can Investors Trust Official Statistics?
    Economics

    Can Investors Trust Official Statistics?

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center