What is 'Leptokurtic'
Leptokurtic is a statistical distribution where the points along the Xaxis are clustered, resulting in a higher peak, or higher kurtosis, than the curvature found in a normal distribution. This high peak and corresponding fat tails mean the distribution is more clustered around the mean than in a mesokurtic or platykurtic distribution and has a relatively smaller standard deviation. A distribution is leptokurtic when the kurtosis value is a large positive.
BREAKING DOWN 'Leptokurtic'
The prefix "lepto" means thin or skinny when referring to the shape of its peak, while "kurtosis" means arched or bulging based on its Greek origins. This leads to a full translation of "thin arch" or "skinny bulge." Serving as a probability distribution, leptokurtic distributions display a particularly sharp peak when compared to mesokurtic or platykurtic distributions. When analyzing historical returns, kurtosis helps gauge an asset's level of risk. A leptokurtic distribution means that small changes happen less frequently because historical values have clustered by the mean. However, this also means that large fluctuations are more likely within the fat tails.Leptokurtosis and Estimated Value at Risk
Leptokurtosis can impact how analysts estimate value at risk (VaR). An investor using a normal distribution to estimate VaR may overestimate at low levels of significance but might overestimate at high levels of significance if the return distribution is leptokurtic. This is the result of the leptokurtic distribution having a fatter tail. The fat tail means risk is coming from outlier events and extreme observations are much more likely to occur. Therefore, conservative investors should avoid this type of return distribution.
Leptokurtosis and Normal Distribution
In order to determine the classification of kurtosis present, a normal distribution is used as a comparison point. In cases where a normal distribution is not known, a quantitative measurement is required based on the formula _4/_4, where _4 refers to the heaviness of the distribution in the tails, also known as Pearsonâ€™s fourth moment about the mean, and sigma refers to the standard deviation.
Leptokurtosis, Mesokurtosis and Platykurtosis
While leptokurtosis demonstrates a tighter distribution in regards to the mean, mesokurtosis and playkurtosis describe the other potential distribution models. Mesokurtic distributions show a peak that is neither higher nor lower than that of a normal distribution, have an excess kurtosis of zero, and are considered a baseline upon which the other two distributions are classified. Platykurtic distributions exhibit less kurtosis than a normal distribution, resulting in a lower peak when compared to that displayed in the normal distribution graph, and have a negative excess kurtosis.

Platykurtic
A type of statistical distribution where the points along the ... 
Kurtosis
A statistical measure used to describe the distribution of observed ... 
Mesokurtic
A term used in a statistical context where the kurtosis of a ... 
Normal Distribution
A probability distribution that plots all of its values in a ... 
Platykurtosis
A statistical measure that indicates the level of peakedness ... 
Tail Risk
A form of portfolio risk that arises when the possibility that ...

Investing
What a Normal Distribution Means
Normal distribution describes a symmetrical data distribution, where most of the results lie near the mean. 
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. 
Investing
Find The Right Fit With Probability Distributions
Discover a few of the most popular probability distributions and how to calculate them. 
Investing
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. 
Investing
Stock Market Risk: Wagging The Tails
The bell curve is an excellent way to evaluate stock market risk over the long term. 
Investing
Quantitative Analysis Of Hedge Funds
Hedge fund analysis requires more than just the metrics used to analyze mutual funds. 
Investing
Fat Tail Risk Makes Global Warming Scarier
The cost of global warming does not take into account climate changerelated catastrophes. Here's where fattail distributions come in. 
Financial Advisor
How to Navigate Taxable Mutual Fund Distributions
It's almost time for yearend capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact. 
Investing
The Uses And Limits Of Volatility
Check out how the assumptions of theoretical risk models compare to actual market performance. 
Financial Advisor
Stretch Your Savings By Working Into Your 70s
Staying employed a little longer may allow for a more comfortable retirement.

What does Value at Risk (VaR) say about the "tail" of the loss distribution?
Learn about value at risk and conditional value at risk and how both models interpret the tail ends of an investment portfolio's ... Read Answer >> 
Is my nonqualified Roth IRA distribution subject to taxes or early distribution ...
The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution ... Read Answer >> 
What are the exceptions to the early distribution penalty for a nonqualified Roth ...
The exceptions are as follows: The distribution is made on or after the date you reach age 59.5 The distribution is made ... Read Answer >>