CFA Level IQuantitative MethodsEasy
A stock's monthly return distribution has a long tail extending toward lower (more negative) returns, while most observations cluster near the higher end. The relationship among the mean, median, and mode is: mean < median < mode. This distribution is best described as:
- ASymmetric (normal)
- BPositively skewed
- CPlatykurtic
- DNegatively skewed
Show answer & explanationAnswer & explanation
Correct answer: D. Negatively skewed
A long left tail with mean < median < mode indicates negative (left) skewness. In negatively skewed distributions, extreme negative outliers pull the mean below the median and mode.
Why the other options are wrong
- A. A symmetric distribution has mean = median = mode with no skew.
- B. Positive skew has a long right tail with mean > median > mode, the opposite pattern.
- C. Platykurtic describes tail thickness (kurtosis), not asymmetry (skewness).
Negative Skewness
A distribution is negatively skewed when it has a long tail on the left side, causing the mean to be less than the median, which is less than the mode.
- Negative skew: mean < median < mode
- Positive skew: mean > median > mode
- Skewness measures asymmetry, not tail thickness (that's kurtosis)
Memory trick: The tail points where skew's sign lies — left tail, negative sign.