Lies, Damned Lies, and Statistics? Examples from Finance and Economics

CEJEME 5: 231-248 (2013)

18 Pages Posted: 30 Dec 2015

See all articles by Karim M. Abadir

Karim M. Abadir

Imperial College Business School

Date Written: December 30, 2015

Abstract

As the saying goes, lies can be classified into the following, from bad to worse: lies, damned lies, and statistics (the worst of all). But is this saying really true? Many puzzles in finance and economics have accumulated over the years. Seemingly reasonable economic theories have been badly rejected by the data, giving rise to suspicions that something is wrong, and not just with the theories. What if the data contained some hidden features that, if neglected, could be misleading the analysis? What if these features required new statistical tools to bring them out and handle them? With a few examples collected from my research with colleagues, this paper will show how the conclusions could be quite different from what was originally thought.

Keywords: Flexible density specification, option pricing, term structure of interest rates, expectation hypothesis, nonlinear long-memory, macroeconomic dynamics.

JEL Classification: C10, C5, C32, G1, E3, E6

Suggested Citation

Abadir, Karim M., Lies, Damned Lies, and Statistics? Examples from Finance and Economics (December 30, 2015). CEJEME 5: 231-248 (2013). Available at SSRN: https://ssrn.com/abstract=2709354

Karim M. Abadir (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

HOME PAGE: http://www3.imperial.ac.uk/portal/page?_pageid=61,629646&_dad=portallive&_schema=PORTALLIVE

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