By Stephen Nelson
Want to work with gamma probability distributions? Microsoft Excel supplies some useful functions, as this short article illustrates.
Want to work with gamma probability distributions? But a quick explanation is order if you’re not familiar with this powerful statistical concept and technique. Here’s the situation: If a Poisson process produces successes at a constant rate of m per unit of time, then the random variable x, the elapsed time until the rth success, follows the gamma distribution.
The gamma distribution is often used to determine the amount of time it takes for the rth person to arrive in a line.
Using the GAMMADIST Function
If you know x and want to find the probability, you use the GAMMADIST function, which
has the following syntax:
=GAMMADIST(x, alpha, beta, cumulative)
For example, if x equals 25, alpha equals 8, beta equals 9, and cumulative is TRUE, you
use the following formula:
The function returns the value 0.007774.
Using the GAMMAINV Function
If you have been given a probability and want to find x, you use the GAMMAINV function,
which has the following syntax:
=GAMMAINV (probability, alpha, beta)
For example, if the probability equals .5, alpha equals 8, and beta equals 9, you use the following formula:
The function returns the value 69.02.
Using the GAMMALN Function
You use the GAMMALN function to find the natural logarithm of the gamma function,
G(x). The GAMMALN function uses the following syntax:
For example, if x equals 25, you use the following formula:
The function returns the value 54.78.
About the author: Seattle CPA Stephen L. Nelson wrote the bestselling book, MBA’s Guide to Microsoft Excel, from which this short article is adapted. Nelson also writes and edits the S Corporations Explained and LLCs Explained websites.
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