AuthorTopic: doubt on NORMAL CURVE
@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.
@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.
@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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