Abstract: | This paper describes the statistical properties of the ratio of two positively distributed variables where the numerator is a component of the denominator and where, therefore, the ratio has implicit boundaries of 0 and 1. Johnson's bounded distribution (the SB) is suggested as a model for ratios of this type, and is derived in this paper as a ratio of lognormal variates. An empirical analysis of bounded financial ratios of UK companies confirms the goodness of fit. |