Quick Definition

Kurtosis is a statistical measure that describes the shape of a distribution's tails in relation to its overall shape, indicating the likelihood of extreme outcomes.

Formula

Examples

• 1In stock market analysis, a high kurtosis of the return distribution suggests a higher risk of extreme price movements.
• 2In risk management, assessing the kurtosis of asset returns helps in understanding the potential for outlier events beyond the standard deviations.
• 3In portfolio construction, a financial analyst might look for assets with lower kurtosis to ensure a more predictable performance with fewer extreme outliers.
• 4In economic data analysis, observing the kurtosis of GDP growth rates can indicate the stability or volatility of economic conditions over time.

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