Understanding Skewness and Kurtosis in Return Distributions

Easy Statistical Concepts And Returns Skewness And Kurtosis

A financial analyst is evaluating the distribution of returns from a particular investment. After collecting data on the monthly returns over the past year, the analyst calculates the skewness and kurtosis of the return distribution. Skewness provides insight into the asymmetry of the distribution, while kurtosis measures the 'tailedness' of the distribution.

Which of the following statements about skewness and kurtosis is correct?

A distribution with a skewness of 0 is perfectly symmetrical.

A distribution with high positive kurtosis indicates a higher probability of extreme values than a normal distribution.

A distribution with negative skewness implies that the majority of returns are concentrated on the right.

Hint

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