Ratio Distribution

A ratio distribution (or quotient distribution) is a probability distribution constructed as the distribution of the ratio of random variables having two other known distributions. Given two (usually independent) random variables X and Y, the distribution of the random variable W that is formed as the ratio

is a ratio distribution.

The Cauchy distribution is an example of a ratio distribution. The random variable associated with this distribution comes about as the ratio of two Gaussian (normal) distributed variables with zero mean. Thus the Cauchy distribution is also called the normal ratio distribution. A number of researchers have considered more general ratio distributions. Two distributions often used in test-statistics, the t-distribution and the F-distribution, are also ratio distributions: The t-distributed random variable is the ratio of a Gaussian random variable divided by an independent chi-distributed random variable (i.e., the square root of a chi-squared distribution), while the F-distributed random variable is the ratio of two independent chi-squared distributed random variables.

Often the ratio distributions are heavy-tailed, and it may be difficult to work with such distributions and develop an associated statistical test. A method based on the median has been suggested as a "work-around".