In This Chapter
Understanding the properties of discrete probability distributions: the binomial and Poisson
Exploring continuous probability distributions: the normal, Student’s t, lognormal, chi-square, and F
Implementing statistical tests of randomness
Chapter 4 introduces the notion of a probability distribution. You use a probability distribution to describe the properties of a random variable. A random variable is actually a function — it assigns numerical values to the outcomes of a random process. For example, you might define a random variable as “the return to Apple stock over the coming trading day” or “the number of bonds in a portfolio that default over the coming year.”
The two basic types of probability distributions you may encounter in statistics are discrete distributions and continuous distributions:
For example, the distribution of bonds that default over the coming year would be discrete, because every bond has a distinct probability ...