On Single Point Forecasts for Fat-Tailed Variables
Physics and Society
2020-08-03 v1 General Economics
Economics
Applications
Methodology
Abstract
We discuss common errors and fallacies when using naive "evidence based" empiricism and point forecasts for fat-tailed variables, as well as the insufficiency of using naive first-order scientific methods for tail risk management. We use the COVID-19 pandemic as the background for the discussion and as an example of a phenomenon characterized by a multiplicative nature, and what mitigating policies must result from the statistical properties and associated risks. In doing so, we also respond to the points raised by Ioannidis et al. (2020).
Cite
@article{arxiv.2007.16096,
title = {On Single Point Forecasts for Fat-Tailed Variables},
author = {Nassim Nicholas Taleb and Yaneer Bar-Yam and Pasquale Cirillo},
journal= {arXiv preprint arXiv:2007.16096},
year = {2020}
}
Comments
Accepted, International Journal of Forecasting