Explanation:
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.
Ultimate access to all questions.
No comments yet.
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