Archive for October, 2009

October 23, 2009

My first academic paper – Can Power Law help us avoid high impact tail events?

As I wrote about previously, I have been accepted into the PhD program in Economics in University of Iceland. The first paper that I wrote is complete and has been accepted to be published as part of the University of Iceland’s annual journal. In addition to that I will be giving a talk about the paper on October 30, here is the program details. Here is the link to paper:

Can Power Law help us avoid high impact tail events?
Abstract:

Some observable data related to social sciences can be described using the power law distribution. Can we understand the impact of tail events better if we used the power law distribution instead of the typical Gaussian ‘Normal’ distribution? The purpose of this paper is to investigate this premise in the context of the Icelandic economy and present the findings.

“The traditional Gaussian way of looking at the world begins by focusing on the ordinary, and then deals with exceptions or so-called outliers as ancillaries. But there is also a second way, which takes the exceptional as a starting point and deals with the ordinary in a subordinate manner – simply because that ‘ordinary’ is less consequential”
                   - Nassim Nicholas Taleb and Benoit Mandelbrot

Although power law distributions do not have the predictive power of a Gaussian Normal distribution, can Power Law help us avoid the high impact Tail Events?

Follow

Get every new post delivered to your Inbox.

Join 3,165 other followers

%d bloggers like this: