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

Related Articles
  1. Investing

    What a Normal Distribution Means

    Normal distribution describes a symmetrical data distribution, where most of the results lie near the mean.
  2. Trading

    Trading With Gaussian Models Of Statistics

    The entire study of statistics originated from Gauss and allowed us to understand markets, prices and probabilities, among other applications.
  3. Investing

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
  4. Trading

    What's Skewness?

    Skewness describes how a data distribution leans.
  5. Managing Wealth

    Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
  6. Managing Wealth

    The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  7. Investing

    Quantitative Analysis Of Hedge Funds

    Hedge fund analysis requires more than just the metrics used to analyze mutual funds.
  8. ETFs & Mutual Funds

    Stock Market Risk: Wagging The Tails

    The bell curve is an excellent way to evaluate stock market risk over the long term.
  9. Trading

    A Simplified Approach To Calculating Volatility

    Though most investors use standard deviation to determine volatility, there's an easier and more accurate way of doing it.
  10. Financial Advisor

    How to Navigate Taxable Mutual Fund Distributions

    It's almost time for year-end capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact.
Trading Center