Question

how is kurtosis used in real estate investments ?

Answer 1

real estate ignore the existence of systematic kurtosis risk.  in the presence of kurtosis, the expected excess rate of return is related not only to the systematic variance and systematic skewness, but also to systematic kurtosis.

The results point out that real estate systematic kurtosis displays significant riskreturn characteristic, and that systematic variance and co-kurtosis are more important than co-skewness in pricing real estate securities. The findings offer additional insights into the measurement of real estate risk. The lack of consideration of systematic kurtosis may lead to an insufficient and irrational premium for the investment risk.

Skewness is used as an alternative risk measurement tool when the data is exhibits asymmetrical distribution. Skewness can either be negative or positive. A stock with negative skewness is one that generates frequent small gains and few extreme or significant losses in the time period considered. On the other hand, a stock with positive skewness is one that generates frequent small losses and few extreme gains. If a stock’s return follows a normal distribution pattern, then their will be no skew.