CHAPTER 38Stop Chasing Tails: Some Long-Only Opening Lines in Portfolio Theory
The two most basic investment concepts are the following:
• Investing returns requires risk taking.
• The humble realization that you can’t predict the future means that you must diversify.
CENTER BETS VERSUS FAT TAILS: THE TOPOLOGY OF “EXTREMISTAN”
Everybody knows what fat tails are, even if just vaguely. They refer to a higher probability of extreme events embodied in thicker tails of a distribution when compared with the Gaussian distribution. Fat tails imply the relevance of the extreme events in life. Specifying the exact distribution is often unimportant because the distribution evolves over time. What is important is recognizing
1. The grave error in making ...
Get Tail Risk Killers: How Math, Indeterminacy, and Hubris Distort Markets now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
