Leptokurtosis


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Leptokurtosis

The condition of a probability density curve to have fatter tails and a higher peak at the mean than the normal distribution.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Leptokurtosis

A state in which the volatility of a security is itself not volatile. That is, lepkurtosis is a state in which the volatility of a security changes at a relatively low rate. This is shown on a chart by a distribution line with data points resembling fat tails and a higher mean, with an even distribution. See also: Kurtosis, Platykurtosis.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The optimal approach for emerging markets is the one that can equally well capture both leptokurtosis (excess kurtosis) and time-varying volatility (heteroscedasticity).
Another advantage of quantile regression over OLS regression is that the quantile regression estimates are more robust against outliers in the response measurements, which gives it an edge when handling heteroskedasticity, skewness, and leptokurtosis in financial data.
All this volatility results in pronounced tail risks, that is, much higher leptokurtosis in the distribution of time series of asset prices and interest rates (Orlowski, 2012; Gabrisch and Orlowski, 2011).
These facts together with a third moment different from zero and a fourth moment higher than three, indicates a non-normal distribution and leptokurtosis. Finally for later comparisons, the Value at Risk (VaR) and expected shortfall (CVaR) numbers report percentile and expected shortfall numbers for long positions at less than 2.5%.
This method will tend to increase the numbers of zero and large returns, which will tend to increase the variance and induce leptokurtosis. It will also tend to create negative ARCH effects, as zero returns are followed by large returns.
This indicates that a leptokurtosis at the left, which was smaller than the value of three, means that the data distribution is normal.
Fortunately, there remains a compelling asset class for the more pedestrian advisor seeking leptokurtosis in exchange-traded investments--specifically, among less liquid publicly-traded stocks.
In practice, the process will vary across studies as a function of the distributions of the belimp coordinates (with complications potentially arising from leptokurtosis).
The author cautions about the use of applying VaR to measure a portfolio or an enterprise as it has limitations due to its heuristic nature, and is subject to attendant assumptions and complications as represented by skewness, leptokurtosis and outliers (especially), and conditional volatility and conditional correlation.