What is Probability Distribution? How it works?
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- Опубликовано: 21 авг 2024
- What is Probability Distribution?
In Statistics, a probability distribution is the mathematical function that gives the probabilities of occurrence of different possible outcomes for an experiment.
Probability distribution describes all the possible values and likelihoods that a random variable can take within a given range. This range will be bounded between the minimum and maximum possible values…
But precisely where the possible value is likely to be plotted on the probability distribution depends on a number of factors. These factors include the distribution's mean (average), standard deviation, skewness, and kurtosis.
How Probability Distribution Work in Our Daily Life?
A Probability distribution help to model our world, enabling us to obtain estimates that a certain event may occur, or estimate the variability of occurrence of any event.
A Probability distribution a common way to describe, and possibly predict, the probability of an event.
A probability distribution links each outcome of an event with its probability of its occurrence.
For example, if you take blood samples from different individuals in a given place, you can calculate the probability distribution of their blood types:
Here in this example, we are counting the number of individuals with different blood types, like A, O, B, and AB and then divide each blood type group by the total amount of individuals. That way we get the probability of each blood type. In this case, blood type is the random variable. The probability distribution shows that individuals with blood type “A” have the highest probability of occurrence, i.e., 50%, as opposed to people with blood type “AB”, which is only 5.0%.
The financial analysts may determine a particular stock's probability distribution to evaluate the possible expected returns that the stock may yield in the future.
Investors use probability distributions to anticipate returns on assets such as stocks over time and to hedge their risk.
Educative
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