Captain Barbosa Wrote: ------------------------------------------------------- > # HF - Positve Skew High Kurtosis > #Distressed (Long Value only) - Negative Skew and > High Kurtosis > #Real Estate- ? > #Commodiites-? normal/not normal (please > Comment?) > #Managed Future - I think should be simlar to HF > (Comment?) > #PE-? > > Skew-Measure of asymmetry > Kurtosis-Measure of extreme return > > Can someone answer the rest of AI RDC? Schweser simply skips skewness and Kurtosis. Can someone who is reading from CFAI help in this please?

I think RE, commodities would be normal.

Here are notes I took from the CFAI readings: RE: Returns for both direct & indirect inv’ts tend to NOT follow normal dist. Direct returns tend to persist (i.e. positive follows positive). HF’s: persistence of hist. performance. Frequently lower skewness, higher kurtosis (i.e. unattractive for investors). To neutralize neg skewness: adopt MVO, skewness & kurtosis-aware approach to fund selection; or invest in mgd futures. Commodities: Considerable difference in stand-alone risk & return among commodities (e.g. neg. for ag, high pos for energy since 1990; low std dev of returns for non-energy vs. energy). So, I guess this means “it depends”. PE/VC: for PE, talks about “greater dispersion of risk vs. public equity inv’t; greater risk of complete loss”… which sounds like skewness. For VC, say that returns generally sharply neg returns for 5-6 yrs, then sharply pos - i.e. the “j-curve” … which sounds a little like kurtosis. Mgd Futures: it doesn’t really say. They talk about MF’s Sharpe Ratio being greater than that of equities and below that of bonds, plus a slightly neg correlation w/equity indices… so if they’re referencing Sharpe Ratio, maybe no skewness/kurtosis? Distressed sec’s: non-normal distribution of returns & exposure to large outlier events, i.e. very high kurtosis… which makes sense.

Here’s my notes for the 6 alternative investments; it touches on return charisteristics in most asset classes: 1. Real Estate: idiosyncratic variables, low vol, inflation-hedge, positive correl with GDP 2. PE/ VC: appraisals, vintage-year effect, returns to VC are subeject to greater error in measurement 3. Commodity: term structure of forward vol, inflation-hedge of storable commodities, historically underperformed bonds and equities judged by sharpe ratio (how did Gutman make his money???) 4. HF: - three bias (backfill, survivorship -1.5-3% higher return, stale price - lower correl); - generally: low skewness and high kurtosis (vs. positive skewness and low kurtosis desired by investors); - global macro funds - positive skewness, but high kurtosis; - equity market neutural - low vol and low kurtosis - rolling returns for consistency 5. MF: zero-sum game nature of derivative, performance persistence 6. Distressed: 4 factors: event risk, J factor, liquidity, market risk.