Histogram

Definition

A histogram is a graphical display of data using bars of different heights. It represents the frequency distribution of numerical data, where each bar groups numbers into specific ranges.

5 Must Know Facts For Your Next Test

1. Histograms are used to visualize the distribution of a dataset and identify patterns such as skewness or modality.
2. The x-axis of a histogram represents the data intervals or 'bins', while the y-axis shows the frequency count for each bin.
3. In finance, histograms can be used to analyze returns on investments, stock price movements, or risk distributions.
4. The choice of bin width significantly affects the shape and interpretability of a histogram; too wide bins may oversimplify data, while too narrow bins may overcomplicate it.
5. A cumulative histogram shows the cumulative frequency up to each bin, providing insights into overall trends.

Review Questions

• What do the bars in a histogram represent?
• How does changing the bin width affect a histogram's appearance?
• Why might a financial analyst use a histogram?

Related terms

Frequency Distribution: A summary of how often different values occur within a dataset.

Bar Chart: A graph that uses bars to represent categorical data with rectangular bars with lengths proportional to their values.

Cumulative Frequency: The sum of frequencies accumulated up to a certain point in a dataset.