CFA CFA Level 1 CFA Level 1 Question of the Week – Quantitative Methods

CFA Level 1 Question of the Week – Quantitative Methods

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    • Matt_AnalystPrep
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      Which of the following statements is LEAST accurate regarding the properties of lognormal distributions?

      • A. Lognormal distributions are skewed to the right.
      • B. Lognormal distributions are more often used than standard distributions
        to model asset prices.
      • C. Lognormal distributions can take negative values.
    • Matt_AnalystPrep
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      The correct answer is C.

      Lognormal distributions are bounded by 0 because they cannot take negative values. Since normal distributions can take negative values, lognormal distributions are more suitable for describing distributions of asset prices.

      Exam Tip: If you have negative values, your data isn’t lognormal.

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