{"id":4520,"date":"2012-05-30T13:07:52","date_gmt":"2012-05-30T20:07:52","guid":{"rendered":"http:\/\/www.blackswanreport.com\/blog\/?p=4520"},"modified":"2012-05-30T13:07:52","modified_gmt":"2012-05-30T20:07:52","slug":"noise-and-signal-nassim-taleb-farnam-street","status":"publish","type":"post","link":"https:\/\/www.blackswanreport.com\/blog\/2012\/05\/noise-and-signal-nassim-taleb-farnam-street\/","title":{"rendered":"Noise and Signal \u2014 Nassim Taleb | Farnam Street"},"content":{"rendered":"<blockquote>\n<p>The more frequently you look at data, the more noise you are disproportionally likely to get (rather than the valuable part called the signal); hence the higher the noise to signal ratio. And there is a confusion, that is not psychological at all, but inherent in the data itself. Say you look at information on a yearly basis, for stock prices or the fertilizer sales of your father-in-law\u2019s factory, or inflation numbers in Vladivostock. Assume further that for what you are observing, at the yearly frequency the ratio of signal to noise is about one to one (say half noise, half signal) \u2014it means that about half of changes are real improvements or degradations, the other half comes from randomness. This ratio is what you get from yearly observations. But if you look at the very same data on a daily basis, the composition would change to 95% noise, 5% signal. And if you observe data on an hourly basis, as people immersed in the news and markets price variations do, the split becomes 99.5% noise to .5% signal. That is two hundred times more noise than signal \u2014which is why anyone who listens to news (except when very, very significant events take place) is one step below sucker.<\/p>\n<\/blockquote>\n<p>via <a href=\"http:\/\/www.farnamstreetblog.com\/2012\/05\/noise-and-signal-nassim-taleb\/\">Noise and Signal \u2014 Nassim Taleb | Farnam Street<\/a>.<br \/>HatTip to Dave Lull.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The more frequently you look at data, the more noise you are disproportionally likely to get (rather than the valuable part called the signal); hence the higher the noise to signal ratio. And there is a confusion, that is not psychological at all, but inherent in the data itself. Say you look at information on [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[530],"tags":[531],"class_list":["post-4520","post","type-post","status-publish","format-standard","hentry","category-antifragility-2","tag-signal-noise"],"_links":{"self":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/4520","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/comments?post=4520"}],"version-history":[{"count":1,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/4520\/revisions"}],"predecessor-version":[{"id":4521,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/4520\/revisions\/4521"}],"wp:attachment":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/media?parent=4520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/categories?post=4520"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/tags?post=4520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}