# 7. The Univariate and Multivariate Distributions

## k. distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution;

What is a univariate distribution?

It is a distribution with only a single random variable. e.g., modeling the distribution return on an asset.

What is a multivariate distribution?

A multivariate distribution specifies the probabilities for a group of related random variables. It is used to describe the probabilities of a group of continuous random variables if all of the individual variables follow a normal distribution.

When you are analyzing the returns on a portfolio of many stocks, what is the biggest determinant of variance?

Stock price correlation - if the stocks move up and down together - will be the biggest determinant of variation.

What are other names for a multivariate distribution?

A multivariate distribution is also called likelihood or joint distribution

##### Source:

- CFA