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The standardized value Z of a random variable X is determined by subtracting the mean of the probability distribution and dividing by the standard deviation:


Cover of Essential Statistics, Regression, and Econometrics


VERY IMPORTANT : Tells how to standardize some discrete random variables.

LOGIC: A standardized variable Z measures how many standard deviations X is above or below its mean. If X is equal to its mean, Z is equal to 0. If X is one standard deviation above its mean, Z is equal to 1. If X is two standard deviations below its mean, Z is equal to –2.