Frequency Distribution of Excess Returns shows the distribution of excess returns of a product, benchmark or a portfolio.
What does the chart show?
Each bar indicates the number of months where the excess returns fall within the band on the horizontal (excess returns) axis
How to interpret the chart
Shorter tails are preferred, indicating that extreme events have occurred less frequently. A positive skew to the right is also preferred as the product, benchmark or portfolio have produced more positive excess returns than negative excess returns.
When to use the chart
This chart is useful to show the return distribution of a product, benchmark or a portfolio. The shape of the distribution can be used to identify skewness and tail length.
Due to the nature of the chart produced, the Frequency Distribution of Excess Returns calculation is limited to a single product or a portfolio.