Question

What is kurtosis. Explain?

Answer 1

the sharpness of the peak of a frequency-distribution curve....

Answer 2

Answer:

In probability theory and statistics, kurtosis is a measure of the "tailedness" of the probability distribution of a real-valued random variable

Explanation:

Distributions with large kurtosis exhibit tail data exceeding the tails of the normal distribution (e.g., five or more standard deviations from the mean). Distributions with low kurtosis exhibit tail data that are generally less extreme than the tails of the normal distribution.

For investors, high kurtosis of the return distribution implies that the investor will experience occasional extreme returns (either positive or negative), more extreme than the usual + or - three standard deviations from the mean that is predicted by the normal distribution of returns. This phenomenon is known as kurtosis risk.