Analyzing Skewness and Kurtosis of Investment Returns

Very Hard Statistical Concepts And Returns Skewness And Kurtosis

Imagine a financial analyst is evaluating the returns of a particular investment portfolio over a 5-year period. The analyst calculates the skewness and kurtosis of the investment returns to assess their distribution characteristics. Skewness provides insight into the asymmetry of the return distribution, while kurtosis indicates the 'tailedness' or the propensity for extreme values relative to a normal distribution.

The analyst finds that the skewness of the portfolio’s returns is calculated as $$S = 0.5$$ and the kurtosis is calculated as $$K = 4.5$$. Based on these values, which of the following statements is true regarding the distribution of the investment portfolio's returns?

The distribution is negatively skewed and has lighter tails compared to a normal distribution.

The distribution is positively skewed and has heavier tails compared to a normal distribution.

The distribution is symmetric and has kurtosis similar to a normal distribution.

Hint

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