Where Do Thin Tails Come From?

Nassim Nicholas Taleb

(Submitted on 25 Jul 2013 (v1), last revised 29 Jul 2013 (this version, v2))

The literature of heavy tails (typically) starts with a random walk and finds mechanisms that lead to fat tails under aggregation. We follow the inverse route and show how starting with fat tails we get to thin-tails when deriving the probability distribution of the response to a random variable. We introduce a general dose-response curve and argue that the left and right-boundedness or saturation of the response in natural things leads to thin-tails, even when the “underlying” random variable at the source of the exposure is fat-tailed.

via [1307.6695] Where Do Thin Tails Come From?.
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