In a scenario where you are dealing with stock return data, the returns are exhibiting high positive kurtosis. What does this imply?
- The stock return data has a high degree of negative skewness.
- The stock return data is less likely to experience extreme events.
- The stock return data is more likely to experience extreme events.
- The stock return data is normally distributed.
High positive kurtosis in stock return data, known as leptokurtosis, means that the returns are prone to extreme jumps, i.e., the distribution has fatter tails. Therefore, the stock is more likely to experience extreme events than a normally distributed return.
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