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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.
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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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