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Basic Question 5 of 23
The distribution of a high-risk stock would tend to be ______.
B. normal
C. skewed
D. flat
E. lognormal
A. peaked
B. normal
C. skewed
D. flat
E. lognormal
User Contributed Comments 10
| User | Comment |
|---|---|
| myanmar | i thougt it would be peaked because of fat tailes |
| akanimo | peaked cant be right because that means that the majority of the area under the curve will be at a central point and the tails would be very thin (low probabilities) ... this would point more to low volatility which is low risk |
| alki | risky stock means higher stnd deviation, higher the deviation from the mean, flatter the distribution |
| fahad | Good one Alki |
| BigJimStud | more peaked = less distribution from the mean more flat = more distribution away from the mean |
| loisliu88 | what about skewed. |
| bantoo | It is really a very smart question. |
| johntan1979 | Very easy to understand if you can imagine flat distribution as the possibility of getting -100% to +infinity returns ==> super high risk. |
| jonan203 | ie. platykurtic |
| Fraser1997 | A way I remember is if you had zero risk and expected return is 15% then the graph would be a vertical line at 15%. So as it gets fatter and shorter means more risk until you have a completely horizontal line. Its not perfect but I find it an easy way to remember. |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
Learning Outcome Statements
calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data
calculate and interpret portfolio standard deviation
describe the effect on a portfolio's risk of investing in assets that are less than perfectly correlated
CFA® 2024 Level I Curriculum, Volume 2, Module 1.