Chartered Alternative Investment Analyst (CAIA) Level I Practice Test

A negatively skewed distribution is characterized by a longer tail on the left side, which results in the mean being less than the median. This means that when the data is graphed, the central tendency of the data is pulled toward the left by the outliers in that direction.

In this context, when the median is greater than the mean, it suggests that there are significant lower outliers that are dragging the mean downwards, while the median, which is less influenced by extreme values, remains higher. This is a definitive characteristic of a negatively skewed distribution and helps identify its shape and properties.

The other characteristics provided in the choices relate to different types of distributions: a positively skewed distribution would have the mean greater than the median, while a symmetrical distribution would indicate that the mean, median, and mode are all equal. Therefore, understanding these relationships is crucial in identifying and analyzing distribution patterns in financial data and other applications relevant to alternative investments.