Asked by allison brockington on Jul 02, 2024
Verified
If a distribution has "fat tails," it exhibits
A) positive skewness.
B) negative skewness.
C) a kurtosis of zero.
D) kurtosis.
E) positive skewness and kurtosis.
Fat Tails
Refers to the occurrences of extreme movements in stock prices or higher than normal risks in investments, which lead to heavy tails in a probability distribution.
Kurtosis
Measure of the fatness of the tails of a probability distribution. Indicates probability of observing extreme high or low values.
Skewness
A measure of the asymmetry of the probability distribution of a real-valued random variable about its mean.
- Recognize and explain the concept of kurtosis in distribution.
Verified Answer
BC
Brittany Collier6 days ago
Final Answer :
D
Explanation :
Fat tails in a distribution indicate that the distribution has extreme values with higher than normal likelihood, which is a characteristic of kurtosis, not specifically positive skewness, negative skewness, or a kurtosis of zero.
Learning Objectives
- Recognize and explain the concept of kurtosis in distribution.