Quick question: Is BASF’s day-to-day rate of stock returns (shown below) distributed normally?
Day-to-day rates of return of BASF stock
Yes? In theory it isn’t! In theory rates of stock returns follow a lognormal distribution as I have shown in “On the distribution of stock return”. Unfortunately, most people don’t take the lognormal distribution serious, although it is very often at work! This article shows how the lognormal distribution arises and why its shape sometimes mistaken for a normal distribution. more →
