- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 3. Statistical Measures of Asset Returns
- Subject 3. Measures of Shape of a Distribution

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**CFA Practice Question**

In computing kurtosis, which of the following is true?

II. The formula preserves the direction of the deviation.

III. Kurtosis measures how clustered the values in a distribution are to the mean.

I. It raises the deviation from the mean to the fourth power.

II. The formula preserves the direction of the deviation.

III. Kurtosis measures how clustered the values in a distribution are to the mean.

A. I and II

B. I and III

C. I, II and III

**Explanation:**I is true. II is false because the fourth power of a negative number is not a negative number. III is true.

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**User Contributed Comments**
4

User |
Comment |
---|---|

katen |
It looks like the answer doesn't fit the explanation or am I reading this wrong? |

julamo |
You're reading this wrong. The fourth power of a number will always be positive, regardless of whether the number is positive or negative... So II is false since a negative deviation will end up positive in Kurtosis |

Profache |
Statement II would be true if the question had asked to compute the Skewness. |

abs013 |
You know I is true because it's in all the choices |