tag:blogger.com,1999:blog-5465015914589377788.post4017953893237032821..comments2021-07-29T12:02:23.660-04:00Comments on Michael James on Money: Why Do Economists Use a Bell Curve if it Doesnâ€™t Apply?Michael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5465015914589377788.post-66109930418371069842012-08-05T20:44:52.793-04:002012-08-05T20:44:52.793-04:00@Terry: Actually, within a range, the data are cl...@Terry: Actually, within a range, the data are close to normally distributed. However, as we get to more extreme events, a normal distribution doesn't work. So, a normal distribution model can be used to answer some questions reasonably well, but not others. The trick is understanding where it can be used. Unfortunately, there are those who deliberately misapply it for personal gain.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-4432623881492679152012-08-05T18:24:32.458-04:002012-08-05T18:24:32.458-04:00There is no theoretical or empirical reason to bel...There is no theoretical or empirical reason to believe that the data resulting from measurements are normally distributed. When economists assume the data are normally distributed they are making a mistake.Terry Oldberghttp://www.knowledgetothemax.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-68160952056895174152009-09-04T08:50:40.892-04:002009-09-04T08:50:40.892-04:00Anonymous: I've read both Taleb books you men...Anonymous: I've read both Taleb books you mention. Unfortunately, I read them before I read Mandelbrot's book. Taleb's ideas are largely based on Mandelbrot's, and I like Mandelbrot's book much better.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-73870796359784981092009-09-04T07:48:20.240-04:002009-09-04T07:48:20.240-04:00The normal distribution is preferred, because it i...The normal distribution is preferred, because it is mathematically convenient, and least squares optimization leads to maximum likelihood results. Using skewed distributions makes the math much more complicated. I haven't read Mandelbrot (yet), but Taleb refers to him in 'Fooled by Randomness' and 'The Black Swan'. Read both of those if you want to get a chuckle - there's no math in either...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-51391284459048798612009-09-03T03:56:46.152-04:002009-09-03T03:56:46.152-04:00Maybe the basic problem is the convenience of the ...Maybe the basic problem is the convenience of the model, which offers a handy starting point and manageability. The economists' argument seems to be like that for democracy - it isn't perfect but it's the best compared to available alternatives. But behavioural finance suggests that manias which create the extremes are the real "normal" - that the basic assumption that events are independent isn't true. So perhaps we do need a new model.CanadianInvestorhttps://www.blogger.com/profile/05645767559302303541noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-19211822022625789392009-09-01T19:18:47.359-04:002009-09-01T19:18:47.359-04:00Great post. The math is beyond me, but I have som...Great post. The math is beyond me, but I have some understanding of the implications.<br /><br />Having your computer do two million dice throws reminds me of "Hitchhikers Guide to the Galaxy"'s Marvin the robot saying "Here I am, brain the size of a planet" (and you have me continuously rolling dice).genehttps://www.blogger.com/profile/05608927986297939720noreply@blogger.com