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Creating portfolio risk and return models [15]

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Bullet points include: Suppose we think that ‘behaviour’ that is highly non-Normal is likely to be ‘interesting’ (i.e. worth exploring further) and probably ‘meaningful’ Suppose we also associate non-Normality with (positive excess) kurtosis Conveniently: All linear combinations of independent distributions have a kurtosis less than or equal to the largest kurtosis of any of the individual distributions Kurtosis is scale independent (i.e. k.x has the same kurtosis as x if k is a scalar)

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