Goal

Visualize and examine changes in the underlying trend in the downside risk of your portfolio in terms of kurtosis.

Choose your stocks.

from 2012-12-31 to present

1 Import stock prices

2 Convert prices to returns

3 Assign a weight to each asset

## [1] "AMZN" "TM"   "TSLA"
## [1] 0.50 0.25 0.25
## # A tibble: 3 × 2
##   symbols weights
##   <chr>     <dbl>
## 1 AMZN       0.5 
## 2 TM         0.25
## 3 TSLA       0.25

4 Build a portfolio

## # A tibble: 60 × 2
##    date        returns
##    <date>        <dbl>
##  1 2013-01-31  0.0595 
##  2 2013-02-28 -0.00259
##  3 2013-03-28  0.0284 
##  4 2013-04-30  0.0954 
##  5 2013-05-31  0.181  
##  6 2013-06-28  0.0455 
##  7 2013-07-31  0.0992 
##  8 2013-08-30  0.0204 
##  9 2013-09-30  0.104  
## 10 2013-10-31  0.0313 
## # ℹ 50 more rows

5 Calculate Kurtosis

## # A tibble: 1 × 1
##   Kurtosis
##      <dbl>
## 1    0.364

6 Plot

Rolling kurtosis

Has the downside risk of your portfolio increased or decreased over time? Explain using the plot you created. You may also refer to the skewness of the returns distribution you plotted in the previous assignment.

After researching kurtosis, I think I have a fairly good grasp about it. So it is weird but the kurtosis that you’re returning is an indicator to the shape of your bell curve and speaks to the outliers you may have. 3 is the magic number and if you have above that then you are said to have a larger standard deviation and more outliers. This can mean a couple things because maybe it goes in your favor and its for ahuge positive return but it could also blow up in your face and be a major negative return. A negative kurtosis means that more data points are located near the mean and less near the tails but they tend to be flatter. As you can see, my portfolio had a negative kurtosis from 2015 to 2017 which I suppose isn’t the worst thing but I really like how 2017 went overall staying just above 0 and then in the end of the year flattening out right at 1. This tells me that the distribution of the bell curve is fairly normal and that I would be comfortable with my projected return on portfolio fall within two standard deviation points.