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. Probability Distribution

    A statistical function that describes all the possible values ...
  2. Normal Distribution

    A probability distribution that plots all of its values in a ...
  3. Sampling Distribution

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

    The most common type of distribution for a variable. The term ...
  5. Uniform Distribution

    In statistics, a type of probability distribution in which all ...
  6. Distribution

    1. When trading volume is higher than that of the previous day ...
Related Articles
  1. Investing

    What a Normal Distribution Means

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

    Find The Right Fit With Probability Distributions

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

    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. Trading

    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. Investing

    Stock Market Risk: Wagging The Tails

    The bell curve is an excellent way to evaluate stock market risk over the long term.
  6. Investing

    The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  7. Investing

    Explaining Standard Error

    Standard error is a statistical term that measures the accuracy with which a sample represents a population.
  8. Financial Advisor

    Stretch Your Savings By Working Into Your 70s

    Staying employed a little longer may allow for a more comfortable retirement.
  9. Financial Advisor

    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.
  10. Investing

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
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. 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 >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center