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. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  5. Probability Distribution

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

    A statistical error caused by human error to which a specific ...
Related Articles
  1. Personal Finance

    Does Your Investment Manager Measure Up?

    These key stats will reveal whether your advisor is a league leader or a benchwarmer.
  2. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  3. Bonds & Fixed Income

    Find The Highest Returns With The Sharpe Ratio

    Learn how to follow the efficient frontier to increase your chances of successful investing.
  4. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...
  5. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  6. 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.
  7. Investing Basics

    How Does Goodwill Affect Financial Statements?

    Goodwill is a bit of a paradox--intangible, yet it is recorded as an asset on the purchasing company's balance sheet.
  8. 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.
  9. Technical Indicators

    The Normal Distribution Table, Explained

    The normal distribution formula is based on two simple parameters - mean and standard deviation
  10. Economics

    Can Investors Trust Official Statistics?

    The official statistics in some countries need to be taken with a grain of salt. Find out why you should be skeptical.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center