Tails of the unexpected
June 9, 2012 3:06 PM Subscribe
Tails of the Unexpected:
posted by ecmendenhall (19 comments total)
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"Normality has been an accepted wisdom in economics and finance for a century or more. Yet in real-world systems, nothing could be less normal than normality. Tails should not be unexpected, for they are the rule." An eminently human-readable explanation of why normal models fail to describe the uncertainties of our abnormal world.
Statistics makes my brain hurt: A gentle introduction to the normal distribution. An intuitive demonstration. A more extensive video from Khan Academy. An intuitive explanation of power laws. A familiar example of power laws.
Further reading: "The Fourth Quadrant"
, "The Pretence of Knowledge"
Previously: Visualizing randomness
, modeling uncertainty
, tail probabilities
, Black Swans
, complex systems
, power law distributions
, fake power law distributions
, prediction and prophecy in the social sciences
, network formation
, subjective expectations
, the limits of statistics