Question
How does covariance relate to correlation between two assets?
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Answer
extCov(Ri,Rj)=hoijimesextSDiimesextSDj.
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Question
Why is leptokurtosis important in investment risk analysis?
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Answer
Extreme outcomes occur more often than normal predicts.
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Question
What does leptokurtosis mean in a return distribution?
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Answer
More peaked with fatter tails than normal.
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Question
Why is a negatively skewed return distribution undesirable to investors?
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Answer
It increases downside tail risk despite modest average returns.
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