I’ve found this standard normal random number generator in a number of places, one of which being from one of Paul Wilmott’s books. The idea is that we can use the Central Limit Theorem (CLT) to easily generate values distributed according to a standard normal distribution by using the sum of 12 uniform random variables and subtracting 6. In Excel, the implementation looks like this:
=RAND()+RAND()+RAND()+RAND()+RAND()+RAND()+RAND()+RAND()+RAND()+RAND()+RAND()+RAND()-6
By doing a simple cut-and-paste, we can stick this formula in an Excel cell and go on with our merry way assuming we have generated values from a standard normal distribution. But what is really going on here, and how good does this generator work?
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