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).
Supported in partVerified against the publisher's abstract
The abstract establishes only that speculative-market price behaviour is modelled by a stable Paretian (fat-tailed) law instead of the Gaussian; it says nothing of crash dominance or variance-based understatement.
“the Gaussian distribution is replaced throughout by another family of probability laws to be referred to as stable Paretian”
- 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.
Supported in partVerified against the publisher's abstract
Mandelbrot's abstract proposes replacing the Gaussian random walk with stable Paretian laws for speculative prices, supporting a heavy-tailed price model but not the aggregation, universality, or critical-phenomena framing of the claim.
“the Gaussian distribution is replaced throughout by another family of probability laws to be referred to as stable Paretian”
- 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¶
Does it exist? Confirmed. This work's DOI resolves to a registered record, which fixes its identity. That is all it fixes.
Does it back the claim? Read against the text for 2 of 3 citations: 2 supported in part. Each verdict is shown under its citation below, with what in the work backs the sentence.
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Registry ID ref:7ef743832243 · see in the full table