Kurtosis

A measure of how much weight sits in a distribution's tails compared with the normal. Excess kurtosis above zero means fat tails: extreme outcomes more common than a normal distribution implies.

Where you will meet it

Kurtosis appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain what skewness and kurtosis say about a return distribution
  CFA Level I · Quantitative Methods

  “Kurtosis measures tail weight relative to the normal distribution: excess kurtosis above zero means fat tails, so extreme outcomes are more likely than a normal distribution implies.”

• Interpret the metrics and charts that a strategy backtest reports
  CFA Level II · Portfolio Construction

  “Because strategy returns are often non-normal, it may also show skewness, excess kurtosis, downside deviation, VaR and conditional VaR, plus rolling performance across periods.”

See also

Fat tails · Normal distribution

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with K · Glossary