Our previous posting on kurtosis seems to have generated considerable interest. Who knew that ‘fat tails’ could be so popular?

One reader who contacted us was William Shadwick, founder of Omega Analysis, a quantitative research firm based on London.  Bill is known to many as the developer of the Omega Ratio.  And along with co-author Ana Cascon, he recently won the Investment Management Consultants Association’s Journalism Award for his paper on new methods of calculating tail risk (the paper first appeared in the Journal of Investment Consulting’s Spring 2006 edition).  Unfortunately, the paper is only available to JOIC subscribers.  But Bill has allowed us to host Omega Analysis’ Primer on tail risk analysis here and also spent some time on the phone with me last week to further explain his ideas.

The document introduces a new statistic Shadwick calls the C-S Character of a distribution.  He says this measure is vastly superior to kurtosis in dealing with the sort of data sets available from hedge fund managers.

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