The Variation of Certain Speculative Prices¶
Mandelbrot, B. (1963). The Variation of Certain Speculative Prices. The Journal of Business, 36(4), 394-419.
Cited by¶
3 citations across 3 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Heavy-Tailed Distributions
- Finance and economics: Market returns and losses are fat-tailed; the rare crash dominates long-run risk, so variance-based intuition systematically understates exposure.
This sourceShows that cotton-price changes follow a stable Paretian (fat-tailed) law rather than a Gaussian, so the rare large move dominates risk and variance-based reasoning understates exposure (D54-517).
- Finance and economics: Market returns and losses are fat-tailed; the rare crash dominates long-run risk, so variance-based intuition systematically understates exposure.
- Pareto Effect (80/20 Rule)
- … distribution arises from identifiable generative mechanisms (preferential attachment producing rich-get-richer dynamics; multiplicative growth producing lognormal distributions; Yule processes; self-organized criticality) rather than pure randomness; identifying the mechanism informs appropriate intervention design
This sourceShows that cotton-price changes follow a stable Paretian (fat-tailed) law rather than a Gaussian, so the rare large move dominates risk and variance-based reasoning understates exposure (D54-517).
- … distribution arises from identifiable generative mechanisms (preferential attachment producing rich-get-richer dynamics; multiplicative growth producing lognormal distributions; Yule processes; self-organized criticality) rather than pure randomness; identifying the mechanism informs appropriate intervention design
- Universality
- The coarse-graining is aggregation over many trades and many independent shocks; the surviving signature is a small set of moment and tail properties; and the universal law is that aggregated returns exhibit heavy power-law tails of a characteristic exponent regardless of the specific asset, importing critical-phenomena reasoning directly.
This sourceDocuments heavy power-law tails in asset returns, importing critical-phenomena-style reasoning into finance where micro detail erases under aggregation.
- The coarse-graining is aggregation over many trades and many independent shocks; the surviving signature is a small set of moment and tail properties; and the universal law is that aggregated returns exhibit heavy power-law tails of a characteristic exponent regardless of the specific asset, importing critical-phenomena reasoning directly.
Verification¶
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