Fluctuation scaling or Taylor’s law of heavy-tailed data, illustrated by U.S. COVID-19 cases and deaths

03/23/2022 9:30 am - 10:30 am

Abstract: Over the last century, ecologists, statisticians, physicists, financial quants, and other scientists discovered that, in many examples, the sample variance approximates a power of the sample mean of each of a set of samples of nonnegative quantities. This power-law relationship of variance to mean is known as a power variance function in statistics, as Taylor’s law in ecology, and as fluctuation scaling in physics and financial mathematics. This survey talk will emphasize ideas, motivations, recent theoretical results, and applications rather than detailed proofs. Many models intended to explain Taylor’s law assume the probability distribution underlying each sample has finite mean and variance. Recently, colleagues and I generalized Taylor’s law to samples from probability distributions with infinite mean or infinite variance and higher moments. For such heavy-tailed distributions, we extended Taylor’s law to higher moments than the mean and variance and to upper and lower semivariances (measures of upside and downside portfolio risk). In unpublished work, we suggest that U.S. COVID-19 cases and deaths illustrate Taylor’s law arising from a distribution with finite mean and infinite variance. This model has practical implications. Collaborators in this work are Mark Brown, Richard A. Davis, Victor de la Peña, Gennady Samorodnitsky, Chuan-Fa Tang, and Sheung Chi Phillip Yam.