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Answer: The analyst is incorrect in his assessment for both portfolios.
## Explanation Let's analyze each portfolio: **Portfolio A:** - Skewness = -1.6 (negative skewness) - Kurtosis = 1.9 (less than 3) **Interpretation:** - Negative skewness means the distribution has a long tail on the **left side** (not more peaked) - Kurtosis < 3 indicates **platykurtic** distribution (less peaked than normal) - The analyst said Portfolio A is "more peaked than normal" - this is **incorrect** **Portfolio B:** - Skewness = 0.8 (positive skewness) - Kurtosis = 3.2 (greater than 3) **Interpretation:** - Positive skewness means the distribution has a long tail on the **right side** - Kurtosis > 3 indicates **leptokurtic** distribution (more peaked than normal) - The analyst said Portfolio B has "long tail on the left side" - this is **incorrect** **Conclusion:** The analyst is incorrect for both portfolios: - Portfolio A is less peaked (platykurtic) with left tail - Portfolio B is more peaked (leptokurtic) with right tail
Author: LeetQuiz Editorial Team
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An analyst gathered the following information about the return distributions for two portfolios during the same time period:
| Portfolio | Skewness | Kurtosis |
|---|---|---|
| A | -1.6 | 1.9 |
| B | 0.8 | 3.2 |
The analyst states that the distribution for Portfolio A is more peaked than a normal distribution and that the distribution for Portfolio B has a long tail on the left side of the distribution. Which of the following is correct?
A
The analyst's assessment is correct.
B
The analyst's assessment is correct for Portfolio A and incorrect for portfolio B.
C
The analyst's assessment is incorrect for Portfolio A but is correct for portfolio B.
D
The analyst is incorrect in his assessment for both portfolios.
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