Lecture

 10  –  Normal  Distribution  and  Lognormal  Distribution  

Normal  Distribution  
Most observations in real life follow the normal distribution. The reason can be
attributed to the central limit theorem which states, “the sum of sufficient large number
(usually 30 or more) of identical random variables of any probability distribution will
follow the normal distribution”.

Most objects in real life are sums of multiple units. Example – thickness of a book.

The normal distribution is given by,

1 !!.!
!!! !
𝑓 𝑥 = 𝑒 !  𝑓𝑜𝑟 −∞<𝑋 <∞
𝜎 2𝜋
The mean and variance of a normal variable are given by,

𝐸 𝑋 =𝜇

𝑉 𝑋 = 𝜎!

If a variable follows the normal distribution with parameters and , then it is

represented as,  
𝑋~𝑁(𝜇, 𝜎 ! )

There is no analytical solution for the integral of normal probability density function. So
we use tables. But we cannot build separate tables of probability for each and 2. So
we standardize the normal variable by subtracting the mean and dividing by the
standard deviation. The resultant standardized normal variable has a mean zero and a
standard deviation of 1.

𝑋−𝜇
𝑍=
𝜎
Now you can use the tables to compute probabilities.

𝑍~𝑁(0,1)

1 !
𝑓 𝑧 = 𝑒 !!.!!  𝑓𝑜𝑟 − ∞ < 𝑍 < ∞
2𝜋
Example

The population mean and standard deviation of males is 6 ft and 1 ft respectively. A

random sample of 40 students is drawn. What is the probability that the average of
these 40 students will be less than 5.5 ft?

Solution

From central limit theorem,  

1
𝑋  ~  𝑁 6,
40

5.5 − 6
𝑃 𝑋 < 5.5 = 𝑃 𝑍 < = 𝑃 𝑍 < −3.16 = 0.00078
1
40

Lognormal  Distribution  
If ln X follows the normal distribution, then X is said to follow the lognormal
distribution. Pollutant concentrations in rivers, for example, are observed to follow the
lognormal distribution. We work with the lognormal variable the same way we work
with the normal distribution after making the transformation of X into the log domain.

 
𝑙𝑛  𝑋~𝑁(𝜃, 𝜔! )
!!
𝐸 𝑋 = 𝑒 !! !
! !
𝑉 𝑋 = 𝑒 !!!! 𝑒 ! − 1

Example

Suppose that the reaction time in seconds of a person can be modeled by a lognormal
distribution with parameter values, = -0.35 and = 0.2.

a) Find the probability that the reaction time is less than 0.6 seconds
b) Find the reaction time that is exceeded by 95% of the population.

Solution:

Data:  𝑙𝑛  𝑋~𝑁(−0.35, 0.2! )

Part a)    
𝑃 𝑋 < 0.6  

= 𝑃 𝑙𝑛  𝑋 < ln 0.6  

ln 0.6 − −0.35
=𝑃 𝑍<  
0.2

= 𝑃 𝑍 < −0.80 = 0.2119  

Part  b)    

𝑃 𝑋 < 𝑥 = 0.05  

𝑃 𝑙𝑛  𝑋 < ln 𝑥 = 0.05  

ln 𝑥 − −0.35
𝑃 𝑍< = 0.05  
0.2

ln 𝑥 − −0.35
= 𝑍!.!"  
0.2
ln x =   −1.645 ∗ 0.2 − 0.35  

x = 0.507  seconds  

Binomial  Process  
A series of trials in which each trial can have only one of two possible outcomes, such as
tossing a coin, is called a binomial process. A general formulation could be any
situation that can be answered with either a yes or a no.

A trial with only two possible outcomes is called as Bernoulli trial. If each trial is
independent and the probability of a success on each trial is constant (p), the number of
successes in n trials, XB follows the binomial distribution, and it is called a binomial
random variable. It is denoted as,

𝑋! ~𝐵(𝑛, 𝑝)

The probability of X number of successes in n trials is given by,

𝑃 𝑋! = 𝑥 = !!𝐶𝑝 ! (1 − 𝑝)!!!

The formula can be derived in three steps,

1) The number of successes being x implies that the probability of a particular

arrangement x successes is px
 2) The number of failures is n-x. The probability of a failure is 1-p. So, the
probability of n-x failures is pn-x.
3) Now the x successes can be arranged in !!𝐶 ways.

Now using the multiplicative rule, the binomial formula is obtained. The expected
value and variance of a binomial random variable are given by,

𝐸 𝑋 = 𝑛𝑝

𝑉 𝑋 = 𝑛𝑝(1 − 𝑝)

Now, let us assume you are not interested in the probability of x successes in n trials;
but interested in the probability of needing x number of trials for r successes. This
situation is, in a way, the reverse of the binomial distribution. We compute the
probability for any number of successes in n trials using the binomial distribution. Here,
we compute the probability for any number of trials required for r successes. The
distribution is called negative binomial distribution. The negative binomial distribution
is given by,
!!! !
𝑃 𝑋!" = 𝑥 = !!!𝐶𝑝 (1 − 𝑝)!!!

The expected value and variance of XNB are given by,

𝑟
𝐸 𝑋!" =
𝑝

𝑟(1 − 𝑝)
𝑉 𝑋!" =
𝑝!

It can easily be seen that the first x-1 successes in the first r-1 trials are a binomial
situation and the binomial distribution result can be used. This result must then be
multiplied by p as that is the probability of success in the rth trial.