Leptokurtic Stocks (Market Close, May 15, 2023)
Which stocks have a leptokurtic distribution in stock prices?
What is a stock with a leptokurtic price distribution and a low price variance?
What is a stock with a leptokurtic price distribution and a low price variance?
We share a list of US-listed stocks with a leptokurtic distribution and a low variance.
A leptokurtic distribution of daily stock price changes have more results in the tails (or > 2 standard deviations) than a normal distribution, and have a greater number of observations clustered tightly around the mean or expected result. This means the typical market return will be as expected, and there is a greater chance of a big surprise.
We narrow our list to leptokurtic stocks that also have a low variance of daily price changes. Each stock individually has a lower variance than a diversified portfolio of all stocks analyzed, which typically contains hundreds or more than a thousand stocks.
A leptokurtic distribution of daily stock price changes have more results in the tails (or > 2 standard deviations) than a normal distribution, and have a greater number of observations clustered tightly around the mean or expected result. This means the typical market return will be as expected, and there is a greater chance of a big surprise.
We narrow our list to leptokurtic stocks that also have a low variance of daily price changes. Each stock individually has a lower variance than a diversified portfolio of all stocks analyzed, which typically contains hundreds or more than a thousand stocks.
More formally, a Leptokurtic distribution has a standardized kurtosis score that is > 4.5, where a normal distribution = 3.0. In our models we run a higher kurtosis limit to identify only the most leptokurtic stocks.
Kurtosis is the fourth central movement of a distribution. It is one way to measure whether a random variable has a normal distribution. We use the kurtosis of a year's worth of daily stock price changes, along with the variance of those changes, to better understand how a stock might perform in the future.
If you can visualize it, the distribution is lifting the bell-shaped curve (or frequency distribution) off the X-axis, giving more room in the tails for observations greater than 2 standard deviations from the mean. Another visualization is that the center of the bell is squeezed to be thinner and taller, fitting more observations within 1 standard deviation of the mean.
A stock that is leptokurtic and low variance appears safer when compared to a normally distributed stock. Options premia may be smaller and this might be a 'flight to safety' stock in highly volatile market situations. We see utilities and consumer products (e.g., food companies) in this category.
Kurtosis is the fourth central movement of a distribution. It is one way to measure whether a random variable has a normal distribution. We use the kurtosis of a year's worth of daily stock price changes, along with the variance of those changes, to better understand how a stock might perform in the future.
If you can visualize it, the distribution is lifting the bell-shaped curve (or frequency distribution) off the X-axis, giving more room in the tails for observations greater than 2 standard deviations from the mean. Another visualization is that the center of the bell is squeezed to be thinner and taller, fitting more observations within 1 standard deviation of the mean.
A stock that is leptokurtic and low variance appears safer when compared to a normally distributed stock. Options premia may be smaller and this might be a 'flight to safety' stock in highly volatile market situations. We see utilities and consumer products (e.g., food companies) in this category.
All stock run (ticker, standard kurtosis score, variance over past year)
The stocks that are leptokurtic and low variance:
The stocks that are leptokurtic and low variance:
Leptokurtic and low variance stocks:
Contact us for more information.
Contact us for more information.
A short film to describe our service and current picks as of market close January 5, 2023