I will add an answer showing how bad the approximation from the central limit theorem (CLT) can be for the Pareto distribution, even in a case where the assumptions for CLT is fulfilled. The assumption is that there must be a finite variance, which for the Pareto means that $\alpha > 2$. For a more theoretical discussion of why this is so, see my answer here: https://stats.stackexchange.com/questions/94402/what-is-the-difference-between-finite-and-infinite-variance/100161#100161 I will simulate data from the Pareto distribution with parameter $\alpha=2.1$, so that the variance "just barely exists". Redo my simulations with $\alpha=3.1$ to see the difference! Here is some R code: ```r ### Pareto dist and the central limit theorem ### require(actuar) # for (dpqr)pareto1() require(MASS) # for Scott() require(scales) # for alpha() # We use (dpqr)pareto1(x,alpha,1) # alpha <- 2.1 # variance just barely exist E <- function(alpha) ifelse(alpha <= 1,Inf,alpha/(alpha-1)) VAR <- function(alpha) ifelse(alpha <= 2, Inf, alpha/((alpha-1)^2 * (alpha-2))) R <- 10000 e <- E(alpha) sigma <- sqrt(VAR(alpha)) sim <- function(n) { replicate(R, {x <- rpareto1(n,alpha,1) x <- x-e mean(x)*sqrt(n)/sigma },simplify=TRUE) } sim1 <- sim(10) sim2 <- sim(100) sim3 <- sim(1000) sim4 <- sim(10000) # do take some time ... ### These are standardized so have all ### theoretically variance 1. ### But due to the long tail, the empirical variances are ### (surprisingly!) much lower: sd(sim1) sd(sim2) sd(sim3) sd(sim4) ### Now we plot the histograms: hist(sim1, prob=TRUE, breaks="Scott", col=alpha("grey05", 0.95), main="simulated Pareto means", xlim=c(-1.8,16)) hist(sim2, prob=TRUE, breaks="Scott", col=alpha("grey30", 0.5), add=TRUE) hist(sim3, prob=TRUE, breaks="Scott", col=alpha("grey60", 0.5), add=TRUE) hist(sim4, prob=TRUE, breaks="Scott", col=alpha("grey90", 0.5), add=TRUE) plot(dnorm, from=-1.8, to=5, col=alpha("red", 0.5), add=TRUE) ``` And here is the plot: [![simulated Pareto means, histogram][1]][1] [1]: https://i.sstatic.net/CuQqV.png One can see that even at sample size $n=10000$ we are far away from the normal approximation. That the empirical variances are so much lower than the true theoretical variance $\sigma^2=1$ is due to the fact that we have a very large contribution to the variance from parts of the distribution in the extreme right tail that do not show up in most samples. **This is to be expected always, when the variance "just barely exists"**. A practical way to think about that is the following. Pareto distributions is often proposed to model distributions of income (or wealth). The expectation of income (or wealth) will have a very large contribution from the very few billionaires. Sampling with practical sample sizes will have a very small probability of including any billionaires in the sample!