### Correlation is not Correlation

To the usual phrase of correlation is not causation, Nassim Taleb often answers: correlation is not correlation. First, just like the mean and PCA, the sample correlation coefficient has persistent small sample effects when variables from Extremistan are involved. These topics are…

### Fisher Tippet Th: a “CLT” for the sample maxima

For fat-tailed random variables, the statistical properties are determined by a few observations in the tail. In Nassim Taleb’s words,

*“the tail wags the dog”*. Therefore, it is vital to study the distribution of these few observations. A logical question to ask, then, is: is there a limiting…### When are GARCH (and friends) models warranted?

In this blogpost, I’ll answer the question, following Nassim Taleb’s latest technical book: Statistical Consequences of Fat Tails,

**when can we use GARCH (and firends) models?**As an example, also following Taleb, I’ll check the resulting conditions with the…
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