CFA CFA Level 1 Question of the Week – Portfolio Management

Question of the Week – Portfolio Management

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    • Avatar of AdaptPrepAdaptPrep
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        The early 21st century saw a few significant stresses on the stock market. The markets dipped deeper and more quickly than many were expecting might happen.

        Which of the following statistical metrics most accurately describes this event?

        • High kurtosis
        • Positive skewness
        • Low mean
      • Avatar of AdaptPrepAdaptPrep
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          The statistical metrics discussed are:

          • Low mean. Could the average stock
            return be overstated? Absolutely. But understating the mean affects all
            returns, not just the outliers.
          • High standard deviation. Again,
            the standard deviation may play a role. These factors are all related to each
            other. But the standard deviation applies to all dispersion, not just the tail.
          • Positive skewness. Skewness very
            well could be playing a part here. The problem with this choice is that an
            event like a large loss would be indicative of negative skewness.
          • High kurtosis.
            Kurtosis is the metric used to capture tail risk. If the extreme events are
            more likely than expected, that means that the kurtosis is higher than
            expected.
        • Avatar of shannondailyshannondaily
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            Woo! I got it right. 🙂 

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