Statistical Measures of Asset Returns – Module 3 – Quant. Methods – CFA® Level I 2026
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0:00 Introduction & Importance of Data in Finance
Why statistics are crucial for CFA Level 1
Using raw data for meaningful investment insights
1:06 Measures of Central Tendency (Mean, Median, Mode)
Arithmetic mean, median, and mode basics
Handling outliers (trimmed mean, winsorized mean)
Real-world example with stock returns
2:43 Weighted Mean, Geometric Mean & Harmonic Mean
When to use each mean in finance
Portfolio returns (weighted mean)
Growth rates over time (geometric mean)
Price averaging in investments (harmonic mean)
4:46 Quantiles: Quartiles, Quintiles, Deciles & Percentiles
Breaking data into segments
How quantiles help interpret investment return distributions
5:50 Measures of Dispersion (Range, MAD, Variance, Std. Dev.)
Defining range, mean absolute deviation, variance, standard deviation
How these measures assess investment volatility
8:00 Downside Deviation & Coefficient of Variation (CV)
Focus on negative returns with downside deviation
CV as a measure of relative risk (risk per unit of return)
Illustrative example calculations
10:57 Distribution Shape: Skewness
Positive (right) skew, negative (left) skew, and symmetric (normal)
Mean, median, mode relationships under skew
Why skewness matters for assessing return distributions
13:07 Distribution Shape: Kurtosis
Leptokurtic vs. mesokurtic vs. platykurtic
Excess kurtosis (fat tails vs. thin tails)
Impact on extreme return probabilities
17:26 Correlation vs. Covariance
Correlation coefficient (range: -1 to +1)
Covariance definition & formula
Why correlation is more intuitive than covariance
20:00 Limitations of Correlation Analysis
Linearity (misses non-linear relationships)
Outliers (distorting effects)
No causation (correlation ≠ causation)
Spurious correlations (false positives)
Incomplete story (ignores underlying dynamics)
22:56 Conclusion & CFA Exam Study Tips
Recap of key statistical measures for asset returns
Practice with real data sets and examples
Final motivation for mastering CFA Level 1 content