four-day returns of stock x: (-.3, .3, -.3, .3) -> MAD = 0; four-day returns of stock y: (-.5, .5, -.5, .5) -> MAD = 0.
nope. look at what the "A" in MAD stands for.
Nassim Taleb: We should retire the notion of standard deviation
41–50 of 254 posts
Re: Nassim Taleb: We should retire the notion of standard deviation
#42I really tried to get through "The Black Swan" and Taleb's writing struck me as so pretentious and self-involved that it made it impossible for me to finish. He strikes me as someone who is so desperate to be important and recognized that an assertion like this doesn't really surprise me.
fascinating.
Re: Nassim Taleb: We should retire the notion of standard deviation
#43So first about the article: >>The notion of standard deviation has confused hordes of scientists What an assertion! It also proved to be very useful for hordes of scientists... what about some examples of confused scientists ? >>There is no scientific reason to use it in statistical investigations in the age of the computer As someone who uses it daily I am eagerly awaiting his argument. >>Say someone just asked you…
I agree with some of what you wrote, but I think you should reread your reply to Taleb with as much scrutiny as you read Taleb.
Re: Nassim Taleb: We should retire the notion of standard deviation
#44Earlier quoted context omitted.
This comment was great fun to read, and I suspect that I share some of your opinions about Taleb (although mine are decaying with each day that passes since I last finished reading any of his books), but it would have been stronger as an argument if you had left off the part about him being a "vile idiot".
I just can't pass it. I gave my best at reading his book. The guy is unable to write one paragraph which doesn't contain some nonsense or serious misuse of established terms. He is insulting whole groups of people and institutions without giving any examples or research. I am pretty sure that if his stuff were posted without his name the conclusion would be obvious: it's just nonsense and very offensive at that. I re…
Re: Nassim Taleb: We should retire the notion of standard deviation
#45four-day returns of stock x: (-.3, .3, -.3, .3) -> MAD = 0; four-day returns of stock y: (-.5, .5, -.5, .5) -> MAD = 0.
No, it's the median absolute deviation. Absolute deviation is the absolute difference between an average and a data point. So (-.3, .3, -.3, .3) -> MAD = 0.3; (-.5, .5, -.5, .5) -> MAD = 0.5.
Re: Nassim Taleb: We should retire the notion of standard deviation
#46So first about the article: >>The notion of standard deviation has confused hordes of scientists What an assertion! It also proved to be very useful for hordes of scientists... what about some examples of confused scientists ? >>There is no scientific reason to use it in statistical investigations in the age of the computer As someone who uses it daily I am eagerly awaiting his argument. >>Say someone just asked you…
Context I think http://papers.ssrn.com/sol3/papers.cfm?abstract_id=970480 And I think you should pay more attention to this: "...as it does more harm than good—particularly with the growing class of people in social science mechanistically applying statistical tools to scientific problems..." if you want to understand where he is coming from.
Definitely more context, but I don't think that paper really backs up the assertion. He asked finance professionals or students, not social scientists. And he asked them at a seminar where I'm guessing they didn't have access to a calculator or computer, so it looks like a lot of them just used a rule of thumb.
The question they asked reads like a trick question to me. And coming up with the right answer would have required working backwards through statistical formula It's the type of thing you do an "Introduction to Statistics" class and then don't think about too often because it doesn't have a ton of practical applications. It seems a lot easier to just ballpark it.
Re: Nassim Taleb: We should retire the notion of standard deviation
#47I was just wondering about a very related problem. I do 5 measurenments of some random variable (let's say execution time) and average them. How should I report the variability of that average? State the sample size and standard deviation?
90% of the data fall between this point and this point. 50% of the data fall between this point and this point. etc.
MAD is more accurate than Standard Deviation to me, if you ask me.
Re: Nassim Taleb: We should retire the notion of standard deviation
#48four-day returns of stock x: (-.3, .3, -.3, .3) -> MAD = 0; four-day returns of stock y: (-.5, .5, -.5, .5) -> MAD = 0.
The A in MAD stands for 'absolute', so no, the MAD for those two stocks is .3 and .5 respectively - versus standard deviations of 0.35 and 0.58.
Re: Nassim Taleb: We should retire the notion of standard deviation
#49I think we'd be better off if we recognized that there are statistical distributions in the world besides the plain old Gaussian. For example, wealth does not follow a Gaussian, so why the heck do we throw around ideas like "above average wealth"? Is MAD any better? Definitely. But I'd like to see a visual demonstration of how well it models exponential-based distributions. How well does it describe their "shape", th…
In that specific case, I'd submit that the word "average" doesn't belong in a conversation attempting any level of rigor. It only encourages the confusion between median and mean.
Re: Nassim Taleb: We should retire the notion of standard deviation
#50Earlier quoted context omitted.
This comment was great fun to read, and I suspect that I share some of your opinions about Taleb (although mine are decaying with each day that passes since I last finished reading any of his books), but it would have been stronger as an argument if you had left off the part about him being a "vile idiot".
I just can't pass it. I gave my best at reading his book. The guy is unable to write one paragraph which doesn't contain some nonsense or serious misuse of established terms. He is insulting whole groups of people and institutions without giving any examples or research. I am pretty sure that if his stuff were posted without his name the conclusion would be obvious: it's just nonsense and very offensive at that. I re…
Funny I find your comments to be doing exactly what they are critiquing. And I think you are letting your hate to him cloud your ability to want to understand what he is trying to say.
I personally find his books mostly valid critiques of established "truths", probably because I agree with much of it. If that makes me a vile idiot I am fine with that. Each to their own.