INTRODUCTION
Most of the data does not exhibit symmetry & instead skew towards either very large positive or very large negative values. If the data is positively skewed, one common choice is a log-normal distribution .
LOGNORMAL DISTRIBUTION
In probability theory, lognormal distribution is a continuous probability distribution of random variable whose algorithm is normally distributed. Or A statistical distribution of random variables which have normally distributed logarithm. i.e. If the random variable Y is log-normally distributed, then X=log(Y) has a normal distribution. Likewise, if X has a normal distribution, then Y=exp(X) has a log-normal distribution. A variable X is log-normally distributed if Y = LN(X) is normally distributed with "LN" denoting the natural logarithm.
BRIEF HISTORY
GALTON and MCALISTER initiated the study of the distribution in papers published together, relating it to the use of the geometric mean as an estimate of location in 1897. KAPTEYN (1903) discussed the genesis of the distribution, KAPTEYN and VAN UVEN (1916) gave a graphical method of estimating the parameters. The distribution is occasionally referred to as the GALTON distribution, after FRANCIS GALTON. The lognormal distribution was found to be accurately representing the distribution of critical dose for a number of drugs; this is also the first time that lognormal distribution applied in real life.
PARAMETERS OF LOG-NORMAL DISTRIBUTION contd. Standard deviation: Also called Scale Parameter.
Denoted by .
= Now log-normal distribution X, in terms of mean and standard deviation.
where erf= error function that occurs in probability statistics. erfc= complementary error function. = cumulative distribution function of standard normal distribution.
When = 0 and
DIFFERENCE BETWEEN NORMAL & LOG-NORMAL DISTRIBUTION Log-normal distribution is applicable when quantity of interest must be positive , since log(X) exists when X is positive. i.e. a random variable which is log-normally distributed takes only positive real values. Whereas normal distribution is applicable to quantity of interest that can be positive or negative , i.e. a random variable which is normally distributed take positive or negative real values.
Log-normal distribution graph is skewed towards right. But normal distribution graph is uniformly distributed over the scale.