Return Distributions
The type of variable that a the return on an asset (except for a risk-free asset) is.
What is a random variable?
What the first moment of a distribution measures.
What is the location or central tendency of a distribution?
What the second moment of a probability distribution measures.
What is the spread of dispersion of a distribution?
What the third moment of a distribution measures.
What is the skewness of a distribution?
What the fourth moment of a distribution measures.
What is how fat the tails are?
What we call numbers that describe the characteristics of a probability distribution.
What are moments of a distribution?
The three measures of the central tendency of a probability distribution.
What are the mean, median, and mode of the distribution?
What is (1) calculate the mean; (2) subtract the mean from each year's return; (3) square each difference; (4) add up the squares; and (5) divide by 9 (or 10)?
The value of the skew of a symmetric distribution.
What is zero?
Another word for how fat the tails of a distribution are.
What is kurtosis?
What the thickness of the tails of an asset's return distribution tell you.
What is the likelihood of very high or very low returns?
How to calculate the mean annual return on an asset if you have 10 years of return data for the asset.
What is add up all the returns and divide by the ten?
How to interpret in words the variance of a distribution of returns.
What is the average squared deviation from the mean?
The range of possible values of the skew.
What is -1 to +1?
The value of the kurtosis for the normal distribution.
What is 3?
What the distributions of most assets' returns are.
What is NOT normal?
How to calculate the median return on an asset?
What is put the returns in order from smallest to largest and find the middle value?
How to calculate the standard deviation of 10 years worth of return data for an asset.
What is take the square root of the variance?
If a distribution is negatively skewed, the tail that is longer.
What is the left tail?
The value of the kurtosis for a distribution that has skinner tails than the normal distribution (a platykurtic distribution).
What is less than three?
What the thickness of the tails of the distribution of the S&P 500 are relative to the thickness of the tails of the normal distribution.
What is thicker?
How to calculate the modal return on an asset.
What is find the most commonly occurring value?
How to interpret in words the meaning of the standard deviation of a distribution of returns.
What is the average deviation around the mean return?
If a distribution is positively skewed, the tail that is longer.
What is the right tail?
The value of the kurtosis for a distribution that has tails that are fatter than the normal distribution (a leptokurtic distribution).
What is greater than 3?