Definition and Importance

A sampling distribution represents the distribution of a sample statistic calculated from repeated random samples of the same size drawn from a population. In finance, it's crucial for:

• Estimating market parameters
• Portfolio risk assessment
• Investment decision-making
• Statistical inference in financial modeling

Central Limit Theorem in Finance

The foundation of sampling distributions in financial analysis, stating that the distribution of sample means approximates a normal distribution as sample size increases, regardless of the underlying population distribution.