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. Tail Risk

    A form of portfolio risk that arises when the possibility that ...
  4. Skewness

    Describe asymmetry from the normal distribution in a set of statistical ...
  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 FAQS
  1. No results found.
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. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...
  6. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  7. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  8. Investing Basics

    How Does Goodwill Affect Financial Statements?

    Goodwill is a bit of a paradox--intangible, yet it is recorded as an asset on the purchasing company's balance sheet.
  9. Investing Basics

    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.
  10. Technical Indicators

    The Normal Distribution Table, Explained

    The normal distribution formula is based on two simple parameters - mean and standard deviation

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center