Excess Kurtosis

AAA

DEFINITION of 'Excess Kurtosis'

A statistical term describing that a probability, or return distribution, has a kurtosis coefficient that is larger then the coefficient associated with a normal distribution, which is around 3. This will signal that the probability of obtaining an extreme value in the future is higher than a lower level of kurtosis.

Kurtosis is a measure of the likelihood that an event occurring is extreme in relation to a given distribution.

INVESTOPEDIA EXPLAINS 'Excess Kurtosis'

Excess kurtosis is an important consideration to take when examining historical returns from a stock or portfolio, for example. The higher the kurtosis coefficient is above the "normal level", the more likely that future returns will be either extremely large or extremely small.

Kurtosis is often referred to the "volatility of volatility".

RELATED TERMS
  1. Normal Distribution

    A probability distribution that plots all of its values in a ...
  2. Probability Distribution

    A statistical function that describes all the possible values ...
  3. Skewness

    Describe asymmetry from the normal distribution in a set of statistical ...
  4. Tail Risk

    A form of portfolio risk that arises when the possibility that ...
  5. Kurtosis

    A statistical measure used to describe the distribution of observed ...
  6. Risk

    The chance that an investment's actual return will be different ...
Related Articles
  1. Markets

    The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  2. Options & Futures

    Price Volatility Vs. Leverage

    Learn how to effectively gauge the risk of the markets you trade.
  3. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  4. Options & Futures

    What Is Your Risk Tolerance?

    Forget the cliches and uncover how much volatility you can really stand.
  5. Fundamental Analysis

    What does a high weighted average cost of capital (WACC) signify?

    Find out what it means for a company to have a relatively high weighted average cost of capital, or WACC, and why this is important to lenders and investors.
  6. Fundamental Analysis

    How do economists and psychologists calculate diminishing marginal utility differently?

    Find out why disagreements about the validity of the law of diminishing marginal utility usually boil down to arguments about definitions.
  7. Fundamental Analysis

    What does the law of diminishing marginal utility explain?

    Learn about some of the important economic insights that can be derived from applications of the law of diminishing marginal utility.
  8. Trading Strategies

    How can retirees protect their wealth in a bear market?

    Look at some helpful hints about how to protect your retirement nest egg when the stock market is underperforming or the economy is in recession.
  9. Economics

    What's the relationship between r squared and beta?

    Learn about the relationship between R-squared and Beta. Explore how the concepts are related and often used in conjunction with portfolio Alpha.
  10. Economics

    What are some limitations of the consumer price index (CPI)?

    Explore some of the basic limitations of the widely used economic indicator, the consumer price index, or CPI, and examine the criticism of its accuracy.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center