Python for Finance Cookbook

Fact 1

The name of the fact (Non-Gaussian distribution of returns) is pretty much self-explanatory. It was observed in the literature that (daily) asset returns exhibit the following:

• Negative skewness (third moment): Large negative returns occur more frequently than large positive ones.
• Excess kurtosis (fourth moment) : Large (and small) returns occur more often than expected.

The pandas implementation of kurtosis is the one that literature refers to as excess kurtosis or Fisher's kurtosis. Using this metric, the excess kurtosis of a Gaussian distribution is 0, while the standard kurtosis is 3. This is not to be confused with the name of the stylized fact's excess kurtosis, which simply means kurtosis higher than that of normal distribution. ...