Capital Budgeting in the Chemical Industry

 

Background Modules for ChE473K
Process Design and Operations

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University of Texas at Austin

Gerald G. McGlamery, Jr., Ph.D., P.E.

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The Chi-Square (c2) Distribution

The chi-square distribution is the continuous random variable resulting from summing the squares of n normal continuous random variables. It is a one-parameter distribution described by its degrees of freedom, n.

The chi-square PDF and CDF are shown below, respectively:

 

In stochastic modeling, the chi-square distribution is best used to model asymmetric variables with a bound near the range of interest, but its flexibility is limited by having only one parameter.

The most important use for the chi-square distribution is in the statistical analysis of variance since the variances estimated from random samples from a normal distribution are distributed as a chi-square distribution.

 

Updated: Sunday, March 7, 2010

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