On Single Point Forecasts for Fat Tailed Variables
On 5 Aug, 2020 By admin 0 Comments
- – Forecasting single variables in fat tailed domains is in violation of both common sense and probability theory.
- – Pandemics are extremely fat tailed.
- – Science is not about making single points predictions but understanding properties (which can sometimes be tested by single points).
- – Risk management is concerned with tail properties and distribution of extrema, not averages or survival functions.
- – Naive fortune cookie evidentiary methods fail to work under both risk management and fat tails as absence of evidence can play a large role in the properties.