The WSJ writes on the adequacy of "monte carlo analysis" routinely used by financial advisors and individuals to "calculate" the probability of the investment accounts successfully finding their retireement needs. The analysis has proven woefully inadequate in achieving its objective since it underestimates the possibility of large declines in investment value. The problem: the assumption of a "bell curve" normal distribution of investment returns which underestimate3s that investment distributions have "fat tails" and "black swan " events occur more frequently in reality than anticipated by the models.
Inadequacy of "bell cuve shaped "probability distributions in financial modelling...sound familiar ?
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