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>Only took an 8-standard deviation event I'm assuming that it's only 8-standard deviations if you assume a Gaussian distribution. Wittgenstein’s Ruler (Nassim
by delhanty 6y ago
>Only took an 8-standard deviation event
I'm assuming that it's only 8-standard deviations if you assume a Gaussian distribution.
Wittgenstein’s Ruler (Nassim Taleb) suggests that it's overwhelming likely that the correct distribution is more fat-tailed than Gaussian.
>When someone tells you it was a 10 sigma event, meaning it is 10 standard deviations and it is Gaussian; unless the information came from God, you can reject the Gaussian distribution for that domain. We show the derivations.
https://nassimtaleb.org/2019/07/wittgensteins-ruler/ https://nassimtaleb.org/2019/07/wittgensteins-ruler/
- anonu 6y agoThis is a very common response to any comment about standard deviations and the market. Turns out gaussian modeling is very easy to understand and to use in most cases. If you're trading intraday, that kind of model is probably fine and a great way to build a baseline. If you're changing your time horizon to days or months of years, then something other than gaussian could be of service. IMHO