Equity

Kurtosis

Definition

A statistical measure of the 'tailedness' of a return distribution. High kurtosis (leptokurtic) indicates fatter tails — more frequent extreme events than a normal distribution would predict.

Formula / Rules
Excess Kurtosis = E[(X−μ)⁴/σ⁴] − 3
Example
High kurtosis in equity returns signals more frequent extreme crashes and surges — the fat tail problem that breaks normal-distribution-based models.
Related Terms
Standard Deviation VaR (Value at Risk)
Frequently Asked Question
What is Kurtosis in finance?
Kurtosis measures tail risk. High kurtosis (fat tails) means extreme events happen more often than normal distribution predicts. Critical for options pricing and risk management.
APA Citation
Clark, R. (2025). Kurtosis. VixShield Trading Glossary. Retrieved from https://www.vixshield.com/glossary/kurtosis
RC
Russell Clark, FNP-C
Author of SPX Mastery series · Founder of VixShield
Last updated:  ·  Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.