Kurtosis
InvestingDefinition
Measure of "tailedness" in a return distribution. High kurtosis = fatter tails than normal = more extreme events.
Normal distribution has kurtosis = 3. Equity returns: ~5-10. Crypto returns: ~15-25. High kurtosis means risk models built on Gaussian assumptions underestimate tail risk by orders of magnitude.
Normal distribution has kurtosis = 3. Equity returns: ~5-10. Crypto returns: ~15-25. High kurtosis means risk models built on Gaussian assumptions underestimate tail risk by orders of magnitude.