2024 CFA Level I Exam: CFA Discussion Topic: doubt on NORMAL CURVE

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Topic: doubt on NORMAL CURVE

Author	Topic: doubt on NORMAL CURVE
doubtful @2010-05-01 11:19:21	I am trying to learn Normal Curve: Can someone tell me what do X and Y axis of this horrible curve stand for? What I understand is that it shows distribution of some data, but when the same is mixed with probablity concept I am lost.
rachel @2010-05-14 08:32:44	Do not concern yourself with what the coordinates X and Y represent. Understand what the shape of the curve represents. A normal curve has the following characteristics: 1 - Bell shaped - shaped identically on both sides with no outliers 2 - The graph is drawn on either side of the mean of all the observations making up the curve 3 - 68% of the observations lie within + or - one standard deviation of the mean. This means 34% (68/2) of observations lie one standard deviation to the left (below) of the mean and 34% of the observations lie to the right (above) of the mean. It is just an accepted convention.
guest @2010-05-21 14:30:49	I think you are confusing about how to convert a distribution to a density curve. Think about a simple example: a class has 40 students, the grades are following: Grade number of people relative frequency C- 1 2.5% C 5 12.5% B 28 70% A- 5 12.5% A 1 2.5% You can use grade as x axis and number of people as y axis to form a hisgram graph which has a bell shape, if you smooth out the edges. The same bell shape can describe the relative frequency as well, therefore it becomes a density curve. Total relative frequency adds up to 1, so the area under the bell shape line is 1. After the transformation, y axis is not important any more. You also can denote x axis as mean value in the middle and number of standard deviation above or under mean. Hope this helps

Author

Topic: doubt on NORMAL CURVE

doubtful
@2010-05-01 11:19:21

I am trying to learn Normal Curve:

Can someone tell me what do X and Y axis of this horrible curve stand for?

What I understand is that it shows distribution of some data, but when the same is mixed with probablity concept I am lost.

rachel
@2010-05-14 08:32:44

Do not concern yourself with what the coordinates X and Y represent. Understand what the shape of the curve represents.

A normal curve has the following characteristics:
1 - Bell shaped - shaped identically on both sides with no outliers
2 - The graph is drawn on either side of the mean of all the observations making up the curve
3 - 68% of the observations lie within + or - one standard deviation of the mean. This means 34% (68/2) of observations lie one standard deviation to the left (below) of the mean and 34% of the observations lie to the right (above) of the mean.
It is just an accepted convention.

guest
@2010-05-21 14:30:49

I think you are confusing about how to convert a distribution to a density curve. Think about a simple example:
a class has 40 students, the grades are following:
Grade number of people relative frequency
C- 1 2.5%
C 5 12.5%
B 28 70%
A- 5 12.5%
A 1 2.5%

You can use grade as x axis and number of people as y axis to form a hisgram graph which has a bell shape, if you smooth out the edges. The same bell shape can describe the relative frequency as well, therefore it becomes a density curve. Total relative frequency adds up to 1, so the area under the bell shape line is 1. After the transformation, y axis is not important any more.

You also can denote x axis as mean value in the middle and number of standard deviation above or under mean.

Hope this helps

CFA Discussion Topic: doubt on NORMAL CURVE

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CFA Discussion Topic: doubt on NORMAL CURVE

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