kurtosis

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

kurtosis

Postby AMITAG1990 » Tue Nov 13, 2012 6:55 pm

An analyst collected the data for return given by the stock of Riflead ltd. for last 75 periods. He wanted to check the Kurtosis of the data relative to the normal distribution. The sum of the fourth power of deviation from the mean is , the standard deviation of the sample is 0.11. Based on the above given data, which of the following observation(s) made by the analyst is/are correct:
I.The distribution is more peaked and has fat tails than the normal distribution
II.The distribution will have more returns with large deviations from the mean.
III.It will have a smaller percentage of small deviations from the mean and a greater percentage of extremely large deviations from the mean.
IV.A greater likelihood of a large deviation from the mean return is often perceived as an increase in risk
Choose one answer.
a. II, III and IV Incorrect
b. I,II and III Incorrect
c. I, II and IV Correct
d. I and IV

Ans is C.
But as it is a leptokurtic, and In my opinion 1st should wrong as it says distribution is more peaked but in leptokurtic It is less peak than normal.. please tell me whether i am right or wrong.??

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balajismz
Finance Junkie
Posts: 63
Joined: Mon Nov 05, 2012 9:13 am

Re: kurtosis

Postby balajismz » Tue Nov 13, 2012 7:06 pm

As far as I rem more peaked than normal is Leptokurtic and less peaked is platykurtic.

In Leptokurtic we will have more %of returns closer to mean and away from mean, giving rise to peakedness at the center and fat tails.

Balaji

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

Re: kurtosis

Postby AMITAG1990 » Wed Nov 14, 2012 12:33 pm

ya balaji u r right.. It was posted by me just by mistake.


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