The Black Swan: The Impact of the Highly Improbable · chapter 8 · id the-black-swan-c8-08-taleb-credits-mandelbrot-as-th
“Taleb credits Mandelbrot as 'the only academic who got it right' regarding financial risk, arguing that Mandelbrot's 1963 work on fat tails in cotton prices was systematically ignored by mainstream finance for decades in favor of the mathematically convenient but empirically wrong Gaussian assumption.”
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Receipts
Mandelbrot, Fama and the Emergence of Econophysicssource alive
Mandelbrot's 1963 findings were initially acknowledged by Eugene Fama (his doctoral student) but gradually sidelined as the efficient market hypothesis and Black-Scholes option pricing model adopted Gaussian assumptions for mathematical convenience.
Wikipedia: Benoit Mandelbrotsource alive
Mandelbrot's work on fat tails in financial markets was largely ignored by mainstream finance for decades. His 2004 book 'The (Mis)Behavior of Markets' aimed to bring these findings to a broader audience.
Cont (2024), 'Benoit Mandelbrot in Finance'source alive
Despite decades of empirical evidence supporting fat tails, mainstream financial theory continued to rely on Gaussian assumptions through the 1980s and 1990s, largely because the mathematical tools (Black-Scholes, VaR) required normality for tractability.
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