Nassim Taleb: We should retire the notion of standard deviation

Re:Nassim Taleb: We should retire the notion of standard dev... by ClementM on Wednesday January 15, 2014 @12:46PM (#7064742)

This article is based on paper Taleb published in 2007. If you want to test yourself, submit yourself to experiment in page 3: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=970480

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Re:Nassim Taleb: We should retire the notion of standard dev... by CamperBob2 on Wednesday January 15, 2014 @02:52PM (#7065695)

   A stock (or a fund) has an average return of 0%. It moves 
   on average 1% a day in absolute value; the average up move 
   is 1% and the average down move is 1%.

How does that yield an average return of 0%?

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Re:Nassim Taleb: We should retire the notion of standard dev... by baking on Wednesday January 15, 2014 @08:00PM (#7067367)

The usual way to do this is to take the natural log, so an up 1% day followed by a down 1% day (or vice versa) will always net out to a 0% change.

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Re:Nassim Taleb: We should retire the notion of standard dev... by MaysonL on Wednesday January 15, 2014 @03:35PM (#7065963)

It goes up a little more often than it goes down?

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Re:Nassim Taleb: We should retire the notion of standard dev... by baking on Wednesday January 15, 2014 @07:54PM (#7067334)

Yes, start by writing a confusing question. One that starts talking about average up moves and average down moves and then switches to asking about the standard deviation of moves. Then publish a paper showing that people were confused by your question. Now you have "research" to back up your claim that everyone is confused by "mean deviation" and "standard deviation".

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Re:Nassim Taleb: We should retire the notion of standard dev... by drblast on Wednesday January 15, 2014 @12:53PM (#7064799)

Thanks! Always nice to read the full research.

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