Statistical Characteristics of Asset Returns

Free CFA Level I lesson in Quantitative Methods. 13 min read, ~1,883 words.

Geometric mean correctly compounds period-over-period returns; arithmetic mean overstates growth, with ordering harmonic ≤ geometric ≤ arithmetic for any non-constant series. Sample variance, covariance, and standard deviation divide by n − 1, not n; population mode understates dispersion. Skewness 0 = right tail (occasional big gains); skewness < 0 =...