Benford’s Law

What is Benford’s Law?

Benford’s Law or the first digit law states that the leading digit of the values in the dataset is small. As the leading digit increases the chance of occurrence also decreases.

Does Benford’s Law provide 100% accurate results?

It must be noted that Benford’s Law does not guarantee 100% results. It provides a base to analyze the results.

Why does Benford’s Law not work for small datasets?

Benford’s Law is a probabilistic law. To determine the underlying pattern, this law requires large amount of data so as to avoid biasedness. It also makes use of large amount of data as it uses logarithms to detect the leading digit.

Can we use Chi-Square Test to test the Acceptability of Benford’s Law?

Yes we can make use of Chi Square test to check whether the data follows the Benford’s Law or not.

What are some Advantages of Benford’s Law?

Benford’s Law has many advantages. Some of them are as follows:

• Used in Fraud Detection.
• Used in Analysis of Data.
• Used for Preliminary Screening Tests.

Benford’s Law is one of the fundamental laws of mathematics that states, “In a large dataset, approximately 30% of numbers start with a 1 while less than 5% start with a 9.”

In this article, we have covered, Benford’s Law definition, formula, examples and others in detail.