Excess Kurtosis


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.

BREAKING DOWN '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".

  1. Probability Distribution

    A statistical function that describes all the possible values ...
  2. Normal Distribution

    A probability distribution that plots all of its values in a ...
  3. Kurtosis

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

    The chance that an investment's actual return will be different ...
  5. Tail Risk

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

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