T Distribution

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".

BREAKING DOWN '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. Sampling Distribution

    A probability distribution of a statistic obtained through a ...
  2. Bell Curve

    The most common type of distribution for a variable. The term ...
  3. Probability Distribution

    A statistical function that describes all the possible values ...
  4. Standard Error

    The standard deviation of the sampling distribution of a statistic. ...
  5. Form T

    A form that FINRA requires brokers to use for reporting equity ...
  6. Distribution Yield

    The amount of cash flow received or paid out by an annuity, REIT ...
Related Articles
  1. Term

    What a Normal Distribution Means

    Normal distribution describes a symmetrical data distribution, where most of the results lie near the mean.
  2. Fundamental Analysis

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
  3. Investing Basics

    Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
  4. 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.
  5. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  6. Fundamental Analysis

    Explaining Standard Error

    Standard error is a statistical term that measures the accuracy with which a sample represents a population.
  7. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
  8. Financial Advisors

    How to Navigate Taxable Mutual Fund Distributions

    It's almost time for year-end capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact.
  9. Mutual Funds & ETFs

    6 Low Fee T. Rowe Price Mutual Funds

    Learn about T. Rowe Price's family of mutual funds and discover which funds in the company's lineup charge the least fees to shareholders.
  10. Investing News

    T. Rowe Price: Investment Manager Highlight (TROW)

    Learn about T. Rowe Price and its investment process, investment management teams, star managers, and financial services and products offered.
RELATED FAQS
  1. Is my non-qualified Roth IRA distribution subject to taxes or early distribution ...

    The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution ... Read Answer >>
  2. Can I elect to NOT have income tax withheld from an IRA (NOT ROTH) distribution before ...

  3. What are the exceptions to the early distribution penalty for a non-qualified Roth ...

    The exceptions are as follows: The distribution is made on or after the date you reach age 59.5 The distribution is made ... Read Answer >>
  4. What are the advantages of having fewer distribution channels?

    Understand what a distribution channel is and how companies leverage them to sell products. Learn about the advantages of ... Read Answer >>
  5. How are distribution channels generally organized?

    Find out how distribution channels are commonly organized, and learn about the most important elements in the distribution ... Read Answer >>
  6. How is standard deviation used to determine risk?

    Understand the basics of calculation and interpretation of standard deviation and how it is used to measure risk in the investment ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center