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> this is true regardless of the distribution of population Nope. Not true for all the distributions. For example, stock prices cannot be used in central limit
by deepsun 7y ago
> this is true regardless of the distribution of population
Nope. Not true for all the distributions. For example, stock prices cannot be used in central limit theorem.
Distributions must have second moment, in other words, have finite variance.
- kgwgk 7y agoStock prices surely have finite variance... but it’s true that it can be high enough to be problematic and if you choose to use an infinite-variance distribution to model prices you may need to pay attention to the consequences.
- deepsun 7y ago> Stock prices surely have finite variance. Are you sure? On my data, they are most closely modeled by Pareto distribution (infinite variance). As far as I remember, that was discovered by Mandelbrot, studying cotton stocks.
- kgwgk 7y agoDo you really think there is a non-zero probability of the price of a stock, say Apple, closing today over $1000? Over $1mn? Over $1bn? Over $184467440737095516.15 which is the largest number of cents that can be stored as a 64-bit integer? Over 10^100 dollars?