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View Diary: The Black Swan Myth (154 comments)

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  •  I'll say it bluntly then (1+ / 0-)
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    New Deal democrat

    if people mean that a black swan means analysis of the data is impossible, those people are idiots.

    What I am saying, and this was my area of research, is that if you are using a model that makes some assumptions about the data you are making inferences on, and those assumptions are demonstrably false, it shouldn't come as a surprise when the conclusions offered by the modeling are worthless (or worse).

    The solution is to use more robust methods, methods that do not assume gaussian returns, that incorporate correlation structures that are robust to heavy tailed distributions, and generally speaking, impose fewer assumptions.

    The problem is that they don't get into this stuff in any detail until you go into graduate school in statistics (and then only if you have an open-minded professor).

    "Competent statisticians will be the front line troops in our war for survival..." George Box, 1976

    by aztecraingod on Thu Jul 16, 2009 at 12:25:20 PM PDT

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