CFP

By Investopedia AAA

Risk and Return Measures - Distribution of Returns


    1. Normal Distribution - A symmetrical return distribution, its mean and median are equal, approximately 68% of its observations lie between plus and minus one standard deviation from the mean; 95% lie between plus and minus two standard deviations; and 99% lie between plus and minus three standard deviations.

    2. Lognormal Distribution - Closely related to normal distribution. Its use is widespread in modeling probability distribution of asset prices.

    3. Skewness - The statistical measure of skew or asymmetry of distributions. An asymmetrical distribution is skewed. Positive skew is where the return distribution has frequent small losses and a few extreme gains; negative skew is the opposite.

    4. Kurtosis - The statistical measure indicating when a distribution is more or less peaked than a normal distribution.
      1. Mesokurtosis - a normal (symmetrical) distribution.
      2. Leptokurtosis - where the distribution of returns is more peaked than normal, i.e. returns cluster closely around the mean.
      3. Platykurtosis - a less than normal peaked distribution, e.g. returns are dispersed more widely around the mean.
Statistical Risk Measures

You May Also Like

Related Articles
  1. Several things factor into the salary of a financial advisor. Here's a look.
    Investing Basics

    How Much Does A Financial Advisor Earn?

  2. With a long list of risks, losses associated with foreign exchange trading may be greater than initially expected. Here are the top 5 forex risks to avoid.
    Economics

    Top 5 Forex Risks Traders Should Consider

  3. ISAs are financial instruments that allow students to raise funds to pay for their degrees by selling shares in their future earnings.
    Investing Basics

    Funding Higher Education With An ISA

  4. Top Ways to protect your purchases from credit card hackers or security breaches.
    Credit & Loans

    7 Ways To Protect Against Credit Card ...

  5. The Internal Revenue Service's new 2015 contribution limits for tax-deferred savings plans are higher; here's what you and your clients should know.
    Investing Basics

    New 2015 Contribution Limits: Advisors ...

Trading Center