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Say you get a lognormal by combining five gaussian-distributed factors (as in the past). Then you condition on four of those factors. The remaining factor, and
by jefftk 3y ago
Say you get a lognormal by combining five gaussian-distributed factors (as in the past). Then you condition on four of those factors. The remaining factor, and hence your overall result, will be gaussian.
Now, maybe in real life there are far too many factors and we're only holding a few constant so the math doesn't apply, but I do think the math is valid.
- alexmolas 3y agoGood point, I was wrong. However, it can also happen that the factors are not gaussian, and still the multiplication would follow a lognormal distribution by the CLT. So saying that "if you condition on enough factors the distribution will be normal" requires the assumption that the factors are normally distributed.