- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 7. Statistical Concepts and Market Returns
- Subject 9. Symmetry and Skewness in Return Distributions

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**CFA Practice Question**

If a distribution is right skewed, which of the following is (are) true?

II. Its skewness is negative.

III. It has a positive mean.

IV. Large positive deviations dominate large negative deviations.

I. It cannot be normally distributed.

II. Its skewness is negative.

III. It has a positive mean.

IV. Large positive deviations dominate large negative deviations.

Correct Answer: I and IV

A normal distribution is symmetrical and hence, has zero skewness (i.e., it is neither positively nor negatively skewed).

If the distribution is right skewed, its skewness is positive but it does not necessarily have a positive mean.

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**User Contributed Comments**
3

User |
Comment |
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Yooo |
Dominate? |

danlan |
Suppose the mode is 100, max is 200 and min is 50. Large positive deviation is 100, which dominates large negative deviation 50 |

bobert |
Or in simpler terms, suppose the mean is 50, if you have 2 outliers on each side, the ones on the right, say 600 and 450 are DOMINATING the negative ones, say 90 and 130. Basically there is a stronger pull to the right by the large deviations. |