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← Fat Tails and Return Distributions
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Question
What does "fat tails" mean in the context of financial return distributions?
1
Standard deviation is higher in bear markets than bull markets
2
Extreme gains and losses occur far more frequently than the normal distribution would predict
3
Returns cluster more tightly around the mean than the normal distribution predicts
4
The distribution of returns is positively skewed, with more large gains than large losses
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