- 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.
- Lognormal Distribution - Closely related to normal distribution. Its use is widespread in modeling probability distribution of asset prices.
- 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.
- Kurtosis - The statistical measure indicating when a distribution is more or less peaked than a normal distribution.
- Mesokurtosis - a normal (symmetrical) distribution.
- Leptokurtosis - where the distribution of returns is more peaked than normal, i.e. returns cluster closely around the mean.
- Platykurtosis - a less than normal peaked distribution, e.g. returns are dispersed more widely around the mean.
Statistical Risk Measures
TradingThe entire study of statistics originated from Gauss and allowed us to understand markets, prices and probabilities, among other applications.
InvestingSkewness describes how a data distribution leans.
InvestingNormal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
Financial AdvisorAdvisors can help clients avoid required minimum distribution mistakes in their retirement plans.
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InvestingThis technique can reduce uncertainty in estimating future outcomes.
InvestingThough most investors use standard deviation to determine volatility, there's an easier and more accurate way of doing it.
Financial AdvisorStaying employed a little longer may allow for a more comfortable retirement.
InvestingThis simple ratio will tell you how much that extra return is really worth.