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Answer: Asset A is riskier than asset B
In finance, Kurtosis affects the riskiness of an asset. The asset with a higher kurtosis is considered riskier than another one with a lower kurtosis. The underlying logic is that a high kurtosis indicates a high number of outliers, meaning that the return for such an asset is highly variable, and therefore highly risky.
Author: Nikitesh Somanthe
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Mary Noel, FRM, is tasked with analyzing the returns of two different assets – A and B. She finds that the two assets have the same mean, variance, and skewness, but A has a higher kurtosis than B. Which of the following statements is most likely true?
A
Asset A is riskier than asset B
B
Asset B is riskier than asset A
C
Both assets are highly profitable
D
Assets A and B will earn negative returns in the long term