CFA Level I · CFA Level I Exam · Portfolio Risk and Return: Part I
Compared with a normal distribution having the same mean and standard deviation, a return distribution with positive excess kurtosis is most likely to exhibit:
A distribution with positive excess kurtosis is leptokurtic, with fatter tails than a normal distribution. It therefore has a greater probability of extreme outcomes in both tails. Asymmetry in the tails is a matter of skewness, which is a separate measure.
- Aa greater probability of extreme outcomes in both tailsCorrect
- Ba longer tail on the right than on the left
- Creturns that are always symmetric around zero
Explanation
Positive excess kurtosis (leptokurtic) means fatter tails and a higher peak, so extreme gains and losses are more likely than under a normal distribution. Tail asymmetry relates to skewness, not kurtosis. Kurtosis does not imply symmetry around zero.
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