If my daily default rate is distributed as a normal I can say that my annual default rate is distributed as a normal?

Question

A study of daily default rates allows me to conclude that they are distributed as a normal one. Previously, I had to eliminate some of the effects of stationarity.

I have following two questions:

How can it be justified that if the daily default rate is normal, then the annual default rate will also follow a Normal distribution? or this assumption is not possible at all? Eliminating the stationarity effect implies the normal distribution assumption is not right?

Add:My daily default rate for a 3 year sample is normal, regardless of the summer months and weekends. My problem is that I do not know if it is possible to increase the temporality of the variable rate of default and assume that it is normal, because it is another variable.

ctd ... i.e. define the variables you're asking about(daily vs annual defaults) and the ones you have observations for and the transformed ones you created ... and explain how all those variables are related — Glen_b, Apr 17 '17 at 23:43
My daily default rate for a 3 year sample is normal, regardless of the summer months and weekends.
My problem is that I do not know if it is possible to increase the temporality of the variable rate of default and assume that it is normal, because it is another variable.Thank you !! — Mark, Apr 24 '17 at 17:14

score 2 · Answer 1 · edited Jun 11 '20 at 14:32

2

Sum of two normally distributed independent random variables is always normally distributed. I suggest you simulate some data and see for yourself. So if your daily values are normally distributed yearly values will be as well.

EDIT:

Let's use simulation to see this. We used two extremely separated normal distributions to prove the point:

a<-rnorm(n,0,1)

b<-rnorm(n,6,0.5)

hist(a+b)

When n tends to infinity, a+b tends to normality.

edited Jun 11 '20 at 14:32

Community

1

answered Apr 17 '17 at 23:31

Vivaldi

572

If the means for two normally distributed data sets are six standard deviations from each other, the resulting distribution will not be normal. The statement is only true if the means are centered near the population mean. – Tavrock Apr 18 '17 at 00:47
This answer as well as the comment by @Tavrock is incorrect. See this question and its answers. – Dilip Sarwate Apr 18 '17 at 03:32
@DilipSarwate that question states adding two Gaussian distributions and returning with a bivariate Gaussian distribution. The question on this thread is asking, as far as I can discern, about adding multiple Gaussian distributions together and calling the answer a univariate Gaussian distribution. – Tavrock Apr 19 '17 at 00:56
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@Tavrock you are wrong. Try simulating. – Vivaldi Apr 24 '17 at 09:52
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@DilipSarwate he has daily deafult rates and want to conclude if yearly deafult rates are also normal. He is actually summing 365 normal distributions. – Vivaldi Apr 24 '17 at 09:52
@Tavrock as others already said, you are wrong, please see https://en.wikipedia.org/wiki/Sum_of_normally_distributed_random_variables – Tim Apr 24 '17 at 10:34
Vivaldi, you have edited your answer to include the word independent in your description of the normal random variables being summed. My comment, and the link I pointed out applies to the original version of your answer; the claim in the edited answer is correct, though unnecessarily restrictive. Also, the simulation is misleading: the sum of two independent normal random variables is always normal, and one does not need to use "widely separated" distributions to "prove" this to those who do not believe anything until it is "verified" by simulation. – Dilip Sarwate Apr 24 '17 at 14:20

score 0 · Answer 2 · answered Apr 13 '17 at 03:14

It depends. For example Let's suppose you collect data on Monday and you run the descriptive stats for that day and found out the skewness and kurtosis. From that you arrived at a conclusion that data for Monday is normal.

Now on Tuesday you again collected data found out the skewness,kurtosis and concluded that data for Tuesday is normal.

Similarly you collected data for all seven days of a week and after collecting data for all seven days you again ran a test.To your surprise it was not normal

ALERT:The daily normal distribution is local whereas week distribution is a superposition of them.

In simpler words Mean,St.Dev on Monday can be 50 and 2,whereas on Tuesday it can be 100,2. Even if you superpose these two days data it is still not normal.

If my daily default rate is distributed as a normal I can say that my annual default rate is distributed as a normal?

2 Answers2