what are the limitations of the normal distribution in finance 
although normal distribution is a statistical concept its applications in finance can be limited because financial phenomena such as expected stock market returns do not fall neatly within a normal distribution prices tend to follow more of a log normal distribution right skewed and with fatter tails therefore relying too heavily on a bell curve when making predictions can lead to unreliable results although most analysts are well aware of this limitation it is relatively difficult to overcome this shortcoming because it is often unclear which statistical distribution to use as an alternative the bottom linenormal distribution also known as the gaussian distribution is a probability distribution that appears as a bell curve when graphed the normal distribution describes a symmetrical plot of data around its mean value where the width of the curve is defined by the standard deviation 