Comments on: Oomph

By: Oomph again at Catallaxy Files

Oomph again at Catallaxy Files — Tue, 22 Mar 2011 11:34:05 +0000

[...] of a kerfuffle at the time here in Australia and got discussed extensively here at the Cat (here, here and here) and also over at John Quiggin’s place (here and here). John Quiggin and I had an [...]

By: Oomph again at Catallaxy Files

Oomph again at Catallaxy Files — Tue, 22 Mar 2011 11:28:00 +0000

[...] i.e. not statistically significantly different from zero even at the 10 percent level. Last year commenter PSC suggested that an ARMA(1,1) model was appropriate and when I do that, the p-value on the time trend is a massive [...]

By: John H.

John H. — Wed, 24 Feb 2010 01:52:24 +0000

Last night I sent off that my McCloskey article to my friend in NY. He was trained in statistics by Cohen(McCloskey uses one of his examples) and recalled how Cohen applied his Power Test to studies in psychology and found a great many failed as valid conclusions. My friend also noted that when the statistical analysis did not achieve the precious .05, researchers did check their arithmetic but if .05 was reached, there was no checking of the arithmetic. Consequently simple arithmetic errors can easily slip through to the published data.

My friend learnt all this a long time ago, before most of you lot were born. And yet the problem continues. Disturbing.

Sinclair, thanks for the referral to McCloskey, right on the money

By: daddy dave

daddy dave — Tue, 23 Feb 2010 12:43:53 +0000

John H…
there are serious practical and theoretical problems with significance testing; and that’s one of them. The probability of the data given the hypothesis (e.g., .05) is not the same as the probability of the hypothesis given the data.

By: John H.

John H. — Tue, 23 Feb 2010 12:30:31 +0000

From McCloskey’s
The Unreasonable Ineffectiveness of Fisherian
“Tests” in Biology, and Especially in Medicine

“But the probability of the hypothesis, given the data, is not what has been tested. The probability that the person is normal, given a positive test for schizophrenia, is in truth quite strong—about 60%—not, as Fisherians believe, less than 3%, because, by Bayes’ Theorem . .. ”

This is exactly the same argument I read in Info: The New Language of Science. It is too often ignored.

Love the title of this work, clearly a play on the physicist Wigner’s famous essay: On the Unreasonable Effectiveness of Mathematics in Science.” Something very lose to that.

Sadly, McCloskey’s paper seems to affirm something I read a long time ago in a Steve Jones’(geneticist) text, The Language of Genes:

154

There are two cultures in science: one (to which most scientists belong) uses mathematics and the other understands it.”

226

I sometimes illustrate of using family similarity to establish the importance of biology by asking what, of our attributes, is most similar among British parents and their children – or their sisters and their cousins and their aunts. The answer is bank-balance.”

By: conrad

conrad — Tue, 23 Feb 2010 09:27:40 +0000

“What possible data do you have that would support that argument when the mass of scientific lit is about 2 degrees assuming static technology”

I’m happy with the scientific consensus, so you can argue with them instead.

By: JC

JC — Tue, 23 Feb 2010 09:07:26 +0000

Treasury bonds are shitty idea for the same reason enumerated above.

They have an expiry date which obviously has an effect on valuation that is markedly different to a stock.

Stock are the best analogy PSC. The reason is stocks are a perpetual with an open rate of return instead on being locked into a rate.

By: JC

JC — Tue, 23 Feb 2010 09:03:55 +0000

JC – “I’ll give you all the data you require from any source. I’ll buy the data on every single trade that has happened in Bank of America stock.
Please tell me where that stock will be in 10 years time within say 2%.”
Too hard. But there are other classes of securities.

Actually it’s not too hard PSC. It’s an impossible request, far different from “too hard”.

For instance suppose a fixed rate trust preferred with $1000 face value in a solid bank is maturing in 2020.
Which statement do you have more confidence in?
“The market price of the security on 1/1/2020 is $1000 +/- 0.1%”
or
“The market price of the security on 1/1/2015 is $1000 +/- 0.1%”
Another case where long term prediction is a bit easier than short term prediction. And in a non-linear “chaotic” market.

Hahahhhaha nice try. So the atmosphere has an expiry date then? You’re really scared then.

I think if you were going to be honest about your example, you would try to use a perpetual preferred, as that will theoretically expire when the earth disappears as a result of serious global warming in perhaps 2 billion years or so. So serious, it will disappear.

PSC, please don’t play games like that, as it’s a little insulting.

By: PSC

PSC — Tue, 23 Feb 2010 08:59:26 +0000

On second thoughts scratch trust preferred – we might quibble about credit quality or whatever – let’s make them treasury bonds.

By: PSC

PSC — Tue, 23 Feb 2010 08:53:38 +0000

JC – “I’ll give you all the data you require from any source. I’ll buy the data on every single trade that has happened in Bank of America stock.

Please tell me where that stock will be in 10 years time within say 2%.”

Too hard. But there are other classes of securities.

For instance suppose a fixed rate trust preferred with $1000 face value in a solid bank is maturing in 2020.

Which statement do you have more confidence in?

“The market price of the security on 1/1/2020 is $1000 +/- 0.1%”

“The market price of the security on 1/1/2015 is $1000 +/- 0.1%”

Another case where long term prediction is a bit easier than short term prediction. And in a non-linear “chaotic” market.