Category Archives: Papers

The Illusion of Thin-Tails Under Aggregation by Nassim Taleb, George Martin :: SSRN

The Illusion of Thin-Tails Under Aggregation

Nassim Nicholas Taleb

NYU-Poly

George A. Martin

affiliation not provided to SSRN

January, 18 2012

Abstract:

It is assumed that while portfolio theory fails with daily returns, that it would work with yearly returns, an standard argument recently repeated in Treynor (2011). This paper debunks the confusion that daily returns, when non-Gaussian but with finite variance can aggregate to thin tails. Alas, portfolio theory fails in both the short and the long run. The central limit theorem operates too slowly for economic data for us to use it and take portfolio theory with any degree of seriousness. The point is illustrated with a Monte Carlo simulation.

Number of Pages in PDF File: 4

Keywords: Risk, Portfolio Theory, Treynor, Markowitz

via The Illusion of Thin-Tails Under Aggregation by Nassim Taleb, George Martin :: SSRN.

Genes | Free Full-Text | Antifragility and Tinkering in Biology and in Business Flexibility Provides an Efficient Epigenetic Way to Manage Risk

Abstract: The notion of antifragility, an attribute of systems that makes them thrive under variable conditions, has recently been proposed by Nassim Taleb in a business context. This idea requires the ability of such systems to ‘tinker’, i.e., to creatively respond to changes in their environment. A fairly obvious example of this is natural selection-driven evolution. In this ubiquitous process, an original entity, challenged by an ever-changing environment, creates variants that evolve into novel entities. Analyzing functions that are essential during stationary-state life yield examples of entities that may be antifragile. One such example is proteins with flexible regions that can undergo functional alteration of their side residues or backbone and thus implement the tinkering that leads to antifragility. This in-built property of the cell chassis must be taken into account when considering construction of cell factories driven by engineering principles.

via Genes | Free Full-Text | Antifragility and Tinkering in Biology and in Business Flexibility Provides an Efficient Epigenetic Way to Manage Risk.