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- Kurtosis_risk abstract "Kurtosis risk in statistics and decision theory is the risk that results when a statistical model assumes the normal distribution, but is applied to observations that do not cluster as much near the average but rather have more of a tendency to populate the extremes either far above or far below the average.Kurtosis risk applies to any kurtosis-related quantitative model that assumes the normal distribution for certain of its independent variables when the latter may in fact have kurtosis much greater than does the normal distribution. Kurtosis risk is commonly referred to as \"fat tail\" risk. The \"fat tail\" metaphor explicitly describes the situation of having more observations at either extreme than the tails of the normal distribution would suggest; therefore, the tails are \"fatter\".Ignoring kurtosis risk will cause any model to understate the risk of variables with high kurtosis. For instance, Long-Term Capital Management, a hedge fund cofounded by Myron Scholes, ignored kurtosis risk to its detriment. After four successful years, this hedge fund had to be bailed out by major investment banks in the late 1990s because it understated the kurtosis of many financial securities underlying the fund's own trading positions.Benoît Mandelbrot, a French mathematician, extensively researched this issue. He felt that the extensive reliance on the normal distribution for much of the body of modern finance and investment theory is a serious flaw of any related models including the Black–Scholes option model developed by Myron Scholes and Fischer Black, and the capital asset pricing model developed by William F. Sharpe. Mandelbrot explained his views and alternative finance theory in a book: The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward.".
- Kurtosis_risk wikiPageID "7069430".
- Kurtosis_risk wikiPageLength "2869".
- Kurtosis_risk wikiPageOutDegree "30".
- Kurtosis_risk wikiPageRevisionID "671860055".
- Kurtosis_risk wikiPageWikiLink Average.
- Kurtosis_risk wikiPageWikiLink Benoit_Mandelbrot.
- Kurtosis_risk wikiPageWikiLink Black–Scholes_model.
- Kurtosis_risk wikiPageWikiLink Capital_asset_pricing_model.
- Kurtosis_risk wikiPageWikiLink Category:Investment.
- Kurtosis_risk wikiPageWikiLink Category:Mathematical_finance.
- Kurtosis_risk wikiPageWikiLink Category:Risk_analysis.
- Kurtosis_risk wikiPageWikiLink Category:Statistical_terminology.
- Kurtosis_risk wikiPageWikiLink Decision_theory.
- Kurtosis_risk wikiPageWikiLink Dependent_and_independent_variables.
- Kurtosis_risk wikiPageWikiLink Fat-tailed_distribution.
- Kurtosis_risk wikiPageWikiLink Fischer_Black.
- Kurtosis_risk wikiPageWikiLink Hedge_fund.
- Kurtosis_risk wikiPageWikiLink Holy_grail_distribution.
- Kurtosis_risk wikiPageWikiLink Investment_theory.
- Kurtosis_risk wikiPageWikiLink Kurtosis.
- Kurtosis_risk wikiPageWikiLink Long-Term_Capital_Management.
- Kurtosis_risk wikiPageWikiLink Myron_Scholes.
- Kurtosis_risk wikiPageWikiLink Normal_distribution.
- Kurtosis_risk wikiPageWikiLink Observation.
- Kurtosis_risk wikiPageWikiLink Risk_(statistics).
- Kurtosis_risk wikiPageWikiLink Security_(finance).
- Kurtosis_risk wikiPageWikiLink Skewness_risk.
- Kurtosis_risk wikiPageWikiLink Statistical_model.
- Kurtosis_risk wikiPageWikiLink Statistics.
- Kurtosis_risk wikiPageWikiLink Stochastic_volatility.
- Kurtosis_risk wikiPageWikiLink Taleb_distribution.
- Kurtosis_risk wikiPageWikiLink The_Black_Swan_(Taleb_book).
- Kurtosis_risk wikiPageWikiLink William_F._Sharpe.
- Kurtosis_risk wikiPageWikiLinkText "Kurtosis risk".
- Kurtosis_risk wikiPageWikiLinkText "kurtosis risk".
- Kurtosis_risk wikiPageWikiLinkText "kurtosis".
- Kurtosis_risk wikiPageUsesTemplate Template:Cite_book.
- Kurtosis_risk wikiPageUsesTemplate Template:Reflist.
- Kurtosis_risk subject Category:Investment.
- Kurtosis_risk subject Category:Mathematical_finance.
- Kurtosis_risk subject Category:Risk_analysis.
- Kurtosis_risk subject Category:Statistical_terminology.
- Kurtosis_risk hypernym Risk.
- Kurtosis_risk type Company.
- Kurtosis_risk type Field.
- Kurtosis_risk type Market.
- Kurtosis_risk type Occupation.
- Kurtosis_risk comment "Kurtosis risk in statistics and decision theory is the risk that results when a statistical model assumes the normal distribution, but is applied to observations that do not cluster as much near the average but rather have more of a tendency to populate the extremes either far above or far below the average.Kurtosis risk applies to any kurtosis-related quantitative model that assumes the normal distribution for certain of its independent variables when the latter may in fact have kurtosis much greater than does the normal distribution. ".
- Kurtosis_risk label "Kurtosis risk".
- Kurtosis_risk sameAs Q6447221.
- Kurtosis_risk sameAs m.0h2s8f.
- Kurtosis_risk sameAs Q6447221.
- Kurtosis_risk wasDerivedFrom Kurtosis_risk?oldid=671860055.
- Kurtosis_risk isPrimaryTopicOf Kurtosis_risk.