Statistical Consequences of Fat Tails

This book, the first volume of the Technical Incerto, weaves a narrative around published journal articles.

Statistical Consequences of Fat Tails

Author: Nassim Nicholas Taleb

Publisher:

ISBN: 9781544508054

Page:

View: 783

The book investigates the misapplication of conventional statistical techniques to fat tailed distributions and looks for remedies, when possible. Switching from thin tailed to fat tailed distributions requires more than "changing the color of the dress." Traditional asymptotics deal mainly with either n=1 or n=∞, and the real world is in between, under the "laws of the medium numbers"-which vary widely across specific distributions. Both the law of large numbers and the generalized central limit mechanisms operate in highly idiosyncratic ways outside the standard Gaussian or Levy-Stable basins of convergence. A few examples: - The sample mean is rarely in line with the population mean, with effect on "naïve empiricism," but can be sometimes be estimated via parametric methods. - The "empirical distribution" is rarely empirical. - Parameter uncertainty has compounding effects on statistical metrics. - Dimension reduction (principal components) fails. - Inequality estimators (Gini or quantile contributions) are not additive and produce wrong results. - Many "biases" found in psychology become entirely rational under more sophisticated probability distributions. - Most of the failures of financial economics, econometrics, and behavioral economics can be attributed to using the wrong distributions. This book, the first volume of the Technical Incerto, weaves a narrative around published journal articles.

Control Performance Assessment Theoretical Analyses and Industrial Practice

J. 16(7), 1998–2003 (2016) Taleb, N.N.: Real-world Statistical Consequences of
Fat Tails: Papers and Commentary. STEM Academic Press, Technical Incerto
Collection (2018) Verboven, S., Hubert, M.: LIBRA: a Matlab library for robust ...

Control Performance Assessment  Theoretical Analyses and Industrial Practice

Author: Paweł D. Domański

Publisher: Springer Nature

ISBN: 3030235939

Page: 367

View: 272

This book presents a comprehensive review of currently available Control Performance Assessment methods. It covers a broad range of classical and modern methods, with a main focus on assessment practice, and is intended to help practitioners learn and properly perform control assessment in the industrial reality. Further, it offers an educational guide for control engineers, who are currently in high demand in the industry. The book consists of three main parts. Firstly, a comprehensive review of available approaches is presented and discussed. The classical canon methods are extended with a discussion of nonlinear and complex alternative measures using non-Gaussian statistics, persistence and fractional calculations. Secondly, the methods’ applicability aspects are visualized with the aid of computer simulations, covering the most popular control philosophies used in the process industry. Lastly, a critical review of the methods discussed, on the basis of real-world industrial examples, rounds out the coverage.

Unifying Themes in Complex Systems IX

The Statistical Consequences of Fat Tails, vol. 1 (2018). www.
fooledbyrandomness.com Einmahl, J., Einmahl, J., de Haan, L.: Limits to Human
Life Span Through Extreme Value Theory. Center Discussion Paper Series No.
2017-051. CentER ...

Unifying Themes in Complex Systems IX

Author: Alfredo J. Morales

Publisher: Springer

ISBN: 3319966618

Page: 506

View: 800

Unifying Themes in Complex Systems is a well-established series of carefully edited conference proceedings that serve to document and archive the progress made regarding cross-fertilization in this field. The International Conference on Complex Systems (ICCS) creates a unique atmosphere for scientists from all fields, engineers, physicians, executives, and a host of other professionals, allowing them to explore common themes and applications of complex systems science. With this new volume, Unifying Themes in Complex Systems continues to establish common ground between the wide-ranging domains of complex systems science.

Nonlinear Dynamics and Control

Taleb, N.N.: Real-World Statistical Consequences of Fat Tails: Papers and
Commentary, Technical Incerto Collection. STEM Academic, Rockville (2018)
Impact of the Controller Algorithm on the Effect of Motor 156 P. D. Doma ́nski and
M.

Nonlinear Dynamics and Control

Author: Walter Lacarbonara

Publisher: Springer Nature

ISBN: 3030347478

Page: 349

View: 296

This second of three volumes from the inaugural NODYCON, held at the University of Rome, in February of 2019, presents papers devoted to Nonlinear Dynamics and Control. The collection features both well-established streams of research as well as novel areas and emerging fields of investigation. Topics in Volume II include influence of nonlinearities on vibration control systems; passive, semi-active, active control of structures and systems; synchronization; robotics and human-machine interaction; network dynamics control (multi-agent systems, leader-follower dynamics, swarm dynamics, biological networks dynamics); and fractional-order control.

Advances in Solid State Physics

Fat Tail Statistics and Beyond Joachim Peinke', Malte Siefert', Stephan Barth",
Christoph Renner", Falk Riess", ... On the other side, such statistics have very
important consequences for applications, as it is the case for risk management.

Advances in Solid State Physics

Author: Bernhard Kramer

Publisher: Springer

ISBN: 3540399704

Page: 566

View: 214

This Volume 44 of Advances in Solid State Physics contains the written versions of most of the invited lectures of the Spring Meeting of the Condensed Matter Physics section of the Deutsche Physikalische Gesellschaft held from March 8 to 12, 2004 in Regensburg, Germany. Many of the topical talks given at the numerous and very lively symposia are also included. They have covered extremely interesting and timely subjects. Thus the book truly reflects the status of the field of solid state physics in 2004, and indicates its importance, not only in Germany but also internationally.

JOURNAL OF BUSINESS ECONOMIC STATISTICS

ticular, for each series under consideration we compute by Monte Carlo the
means of the sample kurtosis statistic using ... have on our test results, although
the sample kurtosis estimates are not indicative of innovations whose tails are
that fat.

JOURNAL OF BUSINESS   ECONOMIC STATISTICS

Author:

Publisher:

ISBN:

Page:

View: 716

Finance and Economics Discussion Series

... value at risk " ) , the difference between .02 and .01 can be large if the
distribution is assumed to have " fat tails . ... The models do not address the
statistical consequences of time aggregating asset returns needed to estimate
longer ...

Finance and Economics Discussion Series

Author:

Publisher:

ISBN:

Page:

View: 353

Noise and Fluctuations in Econophysics and Finance

These instruments are traded globally in significant volumes and are important
tools for both hedging and purely speculative purposes . Most traders are well
aware of the effects of fat - tails and asymmetric risk in these markets , yet the log
 ...

Noise and Fluctuations in Econophysics and Finance

Author: Derek Abbott

Publisher: Society of Photo Optical

ISBN:

Page: 348

View: 530

Proceedings of SPIE present the original research papers presented at SPIE conferences and other high-quality conferences in the broad-ranging fields of optics and photonics. These books provide prompt access to the latest innovations in research and technology in their respective fields. Proceedings of SPIE are among the most cited references in patent literature.

Changing Climate Changing Economy

SOME IMPLICATIONS OF ' FAT - TAILED LOGIC By ' fat - tailed logic ' I mean a
combination of fat tails and temperaturesensitive ... Even if it were true that this
logic represents a valid economic - statistical , precautionary - like principle that ,
at least theoretically , might ... and the warming consequences , is the possibility
of learning and mid - course corrections a plausible counterweight to this fat -
tailed ...

Changing Climate  Changing Economy

Author: Jean-Philippe Touffut

Publisher: Edward Elgar Pub

ISBN:

Page: 171

View: 421

This volume brings a variety of viewpoints on appropriate policy to meet the threats brought on by man-made climate change. Not only economic theory but broader political and methodological perspectives are brought to bear by an authoritive set of authors.

2005 IEEE International Conference on Service Operations and Logistics and Informatics

Abstract- Exchange rate risk constitutes one of the most common forms of risk that
firms in the international arena ... I. INTRODUCTION Events such as market
crashes or cases of individual financial distress regularly point out the potential
effects of fat tails in return distributions ... EVT for financial risk management is an
emerging discipline of statistics that looks at extreme events , and concentrates
on the ...

2005 IEEE International Conference on Service Operations and Logistics  and Informatics

Author: Robin G. Qiu

Publisher:

ISBN:

Page: 1168

View: 370

Journal of the American Statistical Association

Finally , the fourth reason they give against the stable distribution is that
alternative statistical mechanisms have been proposed that are ... as a very
useful modeling tool , which can deliver excellent risk forecasts , especially in
turbulent times and in conjunction with generalized ... Chapter 5 discusses
various fat - tailed and asymmetric distributions , which are better suited for
capturing the skewness and ...

Journal of the American Statistical Association

Author: American Statistical Association

Publisher:

ISBN:

Page:

View: 939

Risk

Mutual self - awareness and fat tails Mutual self - awareness among market
participants is an important distinction between ... risk . sungard . com ears ago ,
when I taught basic statistics , the one concept I tried to be sure students would ...

Risk

Author:

Publisher:

ISBN:

Page:

View: 761

JOURNSL OF BUSINESS AND ECONOMIC STATISTICS

Other things being the same , this gated the consequences of applying the
infeasible HP filter would be expected to blow up tail areas . and found that our
results regarding skewness and fat tails Fourth , distortions appear to reflect the ...

JOURNSL OF BUSINESS AND ECONOMIC STATISTICS

Author:

Publisher:

ISBN:

Page:

View: 202

Financial Stability Review

It is a discipline in statistics that however , it does so focusing entirely on extreme
analyses the behaviour of tails of statistical downturns in banks ... 12 It describes
risk is to be assessed a multivariate approach the families of distributions to
which the has to be chosen . behaviour of minimum ... 423-453 . exhibits “ fat tails
” .

Financial Stability Review

Author:

Publisher:

ISBN:

Page:

View: 172

EMU and Portfolio Diversification Opportunities

Based on the Jarque - Bera statistic ( which is a chi square with two degrees of
freedom ) , the normality assumption is rejected for all 11 countries and both
types of investors . The normality is rejected both because of fat tails and
asymmetry as indicated by the kurtosis and skewness ... The main question here
is to figure out the likely consequences of this non - normality on the battery of
tests that are ...

EMU and Portfolio Diversification Opportunities

Author: Kpate Adjaoute

Publisher:

ISBN:

Page: 37

View: 866

Global Financial Stability Report October 2007

Financial Market Turbulence Causes, Consequences, and Policies International
Monetary Fund. ... VaR may also not be appropriate for P & L Generally , these
other measurement techdistributions with “ fat ” and “ super fat " tails— niques
have not been widely applied in financial ... The level of statistical confidence is
usually set at between 95 and 99 percent — the higher the confidence level , the
more ...

Global Financial Stability Report  October 2007

Author: International Monetary Fund. Monetary and Capital Markets Department

Publisher: INTERNATIONAL MONETARY FUND

ISBN: 9781589066762

Page: 194

View: 468

Published twice yearly, the Global Financial Stability Report (GFSR) was created to provide a more frequent assessment of global financial markets by the IMF and to address emerging market financing in a global context. It provides timely analysis of developments in both mature and emerging market countries and seeks to identify potential fault lines in the global financial system that could lead to crisis. The GFSR aims to deepen its readers’ understanding of global capital flows, which play a critical role as an engine of world economic growth. Of key value, the report focuses on current conditions in global financial markets, highlighting issues of financial imbalances, and of a structural nature, that could pose risks to financial market stability and sustained market access by emerging market borrowers.

A Practical Guide to Heavy Tails

Statistical Techniques and Applications Robert J. Adler, Raisa E. Feldman,
Murad S. Taqqu ... There are only a few theoretical results on the problem of
temporal aggregation related to tail behavior . Therefore ... and conclude that the
Hill estimator remains among the best estimators when it comes to fat - tailed
distributions .

A Practical Guide to Heavy Tails

Author: Robert J. Adler

Publisher:

ISBN:

Page: 533

View: 296

Aimed at the general practitioner, A Practical Guide to Heavy Tails is a unique collection of essays that is concerned primarily with a large number of techniques and approaches for data analysis. The expository papers, all by distinguished experts, are intended for a wide audience from different disciplines. Thus, the papers run the gamut of applications of heavy-tailed modeling, e.g., telecommunications, the Web, insurance, finance. Along with specific applications are several papers devoted to time series analysis, regression, classical signal/noise detection problems, and the general structure of stable processes, viewed from a modeling standpoint.

Acta Physica Polonica

... individual changes and the square root of the number of individuals , or with a
higher power if the fat tail properties become important . ... It is instructive to
analyze consequences resulting ... In statistical mechanics of quasi - stationary
systems one approximates averages over time by averages over a statistical
ensemble .

Acta Physica Polonica

Author:

Publisher:

ISBN:

Page:

View: 160

Focus on Austria

Also, several methods are employed to test the specifications, and the resulting
changes in the risk measures are interpreted. ... To use such theoretical results in
an econometric model, it is necessary to take account of the statistical properties
of the returns. ... Firstly, returns are not normally distributed, because the
empirical distribution of the price changes is marked by the stylized fact of fat tails
.

Focus on Austria

Author:

Publisher:

ISBN:

Page:

View: 775

Option Value and the Timing of Environmental Policy

This analysis illustrates that different forms of uncertainty may have different
effects on the optimal timing of a policy . ... and compute some statistics to
investigate the nature of the “ fat - tails ” observed in the distribution of the
increments of the ...

Option Value and the Timing of Environmental Policy

Author: Jean-Daniel Maurice Saphores

Publisher:

ISBN:

Page: 396

View: 907

Limitations in current numerical methods, statistical tests, and most importantly, available data, may, however, restrict the wide applicability of this approach.