Quant Nugget 4: Annualization and General Projection of Skewness, Kurtosis and All Summary Statistics

GARP Risk Professional - "The Quant Classroom," pp. 59-63, August 2010

8 Pages Posted: 14 Jul 2010 Last revised: 11 Oct 2010

Attilio Meucci

ARPM - Advanced Risk and Portfolio Management

Abstract

If the distribution of a financial variable is highly non-normal, as is the case for the monthly return of some hedge funds or options, how do we compute the projected annualized skewness and kurtosis? We address this question in greater generality, projecting all the summary statistics of the financial variables, in addition to skewness and kurtosis, to arbitrary horizons, in addition to one year. Fully documented MATLAB code is also provided.

Keywords: Square-Root Rule, Higher Moments, Cumulants

JEL Classification: C1, G11

Suggested Citation

Meucci, Attilio, Quant Nugget 4: Annualization and General Projection of Skewness, Kurtosis and All Summary Statistics. GARP Risk Professional - "The Quant Classroom," pp. 59-63, August 2010. Available at SSRN: https://ssrn.com/abstract=1635484

Attilio Meucci (Contact Author)

ARPM - Advanced Risk and Portfolio Management ( email )

HOME PAGE: http://www.arpm.co/

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