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1 July 1992 Financial Analysts Journal Volume 48, Issue 4

What Practitioners Need to Know…About Lognormality

  1. Mark P. Kritzman, CFA

When reading the financial literature we often see statements to the effect that a particular result depends on the assumption that returns are lognormally distributed. What exactly is a lognormal distribution, and why is it relevant to financial analysis? In order to address this question, let us start with a review of logarithms.

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