Platykurtic

What is 'Platykurtic'

Platykurtic is a type of statistical distribution where the points along the X-axis are highly dispersed, resulting in a lower peak (lower kurtosis) than the curvature found in a normal distribution. This low peak, with corresponding thin tails, means the distribution is less clustered around the mean than in a mesokurtic or leptokurtic distribution. Platykurtic is derived from the prefix "platy" which means "broad," resembling its shape - flat, wide or broad. A distribution is platykurtic when the excess kurtosis value is negative.

A distribution is more leptokurtic (peaked) when the kurtosis value is a large positive value, and a distribution is more platykurtic (flat) when the kurtosis value is a large negative value.

Source: Barnard.edu

BREAKING DOWN 'Platykurtic'

The platykurtic distribution's flat shape results from large variations within observations. Investors may consider the kurtosis of asset returns when evaluating a potential investment, since the distribution of values can provide an estimate of asset risk.

A platykurtic distribution denotes a fairly uniform lay out of data, and returns following this distribution will have fewer large fluctuations than assets displaying normal or leptokurtic distributions. This makes the investment less risky.

Equity returns are generally considered to be closer to a leptokurtic distribution than to a normal or platykurtic distribution. If market returns were more platykurtic, events such as black swans would be less likely to occur, since that type of outlier is less likely to fall within a platykurtic distribution’s short tails. Conservative investors will be more comfortable dealing with investments with a platykurtic return distribution.

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