4 ms·
> As a trivial example, a stock whose price started at $1 and increased by $1 every day for 30 years would span 4 orders of magnitude over that time period, but
by TomSwirly 5y ago
> As a trivial example, a stock whose price started at $1 and increased by $1 every day for 30 years would span 4 orders of magnitude over that time period, but would not follow Benford's law.
You would expect if you deliberately created a security whose growth rate monotonically tends to zero over time that you would get anomalous results in any statistical point, but I don't quite see why you bring up this pathological example?
- FabHK 5y agoIf it were to grow by 9 bp (0.09%) every day, it would obey Benford's law. Question is how pathological that would be, but yes, arguably less.
- CrazyStat 5y agoBecause the claim was made that spanning several orders of magnitude is sufficient to allow application of Benford's law: > The big one you need to look for is that the variable spans multiple orders of magnitude. > Berkshire Hathaway going back to 1980 spans three orders of magnitude, so we're good there. > BTC going back 7 years is also decent. It's not quite as good - only spanning two orders of magnitude - but it's enough that we would expect Benford's Law to apply better than it does in this graph. This claim is false. I provided a counterexample to demonstrate as much. Whether or not it's "pathological" is both subjective and irrelevant.