How We Tend To Overestimate Powerlaw Tail Exponents

Preprint English OPEN
Taleb, Nassim N.; (2012)
  • Subject: Mathematics - Statistics Theory | Physics - Data Analysis, Statistics and Probability | Quantitative Finance - Risk Management

In the presence of a layer of metaprobabilities (from uncertainty concerning the parameters), the asymptotic tail exponent corresponds to the lowest possible tail exponent regardless of its probability. The problem explains "Black Swan" effects, i.e., why measurements t... View more
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