So I understand what logs and what the ln key is for on the calculator. The book shows a sample chart of a logarithmic distribution chart
Why is it supposed to be always skewed to the right?
Why is it a rule that there can never be negative values in a logarithmic distribution?
The book talks about a how a normal distribution might lead to negative/impossible values on stock returns. Can’t we just add lower boundaries to the charts, or would that defy the definition of a normal distribution?
Let’s say we had three six-sided dice and we were to draw a distribution graph of possible outcomes. No matter how many times we rolled the die, we could never get a return beneath 3 and we would never get a result above 18. Why can’t we apply the same logic to a stock return?