Normal random variable

Similar financial terms

Abnormal return
In event studies, the part of the return that is not predicted; the change in value caused by the event. Also referred to as excess return, benchmark adjusted.

Lognormal distribution
A varaible has a lognormal distribution when the logarithm of the variable has a normal distribution.

Abnormal returns
Part of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone.

Standardized normal distribution
A normal distribution with a mean of 0 and a standard deviation of 1.

Normalizing method
The practice of making a charge in the income account equivalent to the tax savings realized through the use of different depreciation methods for shareholder and income tax purposes, thus washing out the benefits of the tax savings reported as final net income to shareholders.

Normal portfolio
A customized benchmark that includes all the securities from which a manager normally chooses, weighted as the manager would weight them in a portfolio.

Normal probability distribution
A probability distribution for a continuous random variable that is forms a symmetrical bell-shaped curve around the mean.

Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected spot price.

Normal annuity form
The manner in which retirement benefits are paid out.

Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the actual return that comes from the release of news to the market.

Random Sampling
A sampling scheme whereby each observation is drawn from the population. In particular, no unit is more likely to be selected than any other unit, and each draw is independent of all other draws.

Randomized strategy
A strategy of introducing into the decision-making process a random element that is designed to reduce the information content of the decision-maker's observed choices.

Random walk
Theory that stock price changes from day to day are at random; the changes are independent of each other and have the same probability distribution. Many believers of the random walk theory believe that it is impossible to outperform the market consistently without taking additional risk.

Random variable
A function that assigns a real number to each and every possible outcome of a random experiment.

Continuous random variable
A random value that can take any fractional value within specified ranges, as contrasted with a discrete variable.

Stochastic variable
A variable whose future value is uncertain.

Variable rate loan
Loan made at an interest rate that fluctuates based on a base interest rate such as the Prime Rate or LIBOR.

Variable rated demand bond
Variable rated demand bond (VRDB) is a floating rate bond that can be sold back periodically to the issuer.

Variable rate CDs
Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates.

Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.

Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, and hence variable life policies are referred to as equity-linked policies.

Variable cost
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero. A variable is a cost of producing the product which a company sells. It would include such items as materials and labor that go directly into producing the shipped item. Another term for this is direct cost. These costs are usually shown directly under revenues on an income statement as the first costs associated with producing the revenues that are recorded.

Variable annuities
Annuity contracts in which the issuer pays a periodic amount linked to the investment performance of an underlying portfolio.

Variable
A value determined within the context of a model. Also called endogenous variable.

Variable Price Limit
A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day.