The distribution of returns, measured over a short interval of time, such as daily returns, is best approximated by the
A)normal distribution.
B)lognormal distribution.
C)binomial distribution.
D)uniform distribution.

Question

Quizplus · Accepted Answer

The distribution of returns over a short interval of time, like daily returns, is often best approximated by the normal distribution due to the central limit theorem, which suggests that the sum (or average) of many independent random variables, regardless of their distribution, will tend to be normally distributed.

The Distribution of Returns, Measured Over a Short Interval of Time