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Old 12-08-2013, 06:53 PM   #41
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Originally Posted by FIRE'd@51 View Post
I am not faulting FireCalc. To the contrary, I think it's the best program around. I am only wondering if there is a way to manipulate the overlapping historical data to better simulate a statistical ensemble of "independent" data points. This has nothing to do with PE10 or other valuations, which will always be present. I believe these affect the mean of the ex-ante distribution, but not the variance. I'm interested in focusing soley on the statistical analysis which, I believe, can give us a better handle on the variance, which ultimately determines the ex-ante probabilities.
Originally Posted by Fred123 View Post
Another Firecalc problem that hasn't been mentioned is undersampling of recent years. If, for example, you are looking at 30 year periods then the 2008 meltdown is only included in 5 time series, while years 1982 and earlier are included 30 times. And, of course, it get worse the longer the time period you are using in the calculator. I'm guessing that the underweighting of 2008 makes Firecalc overoptimistic.

I wrote my own little calculator using three methods: Firecalc, MC analysis assuming a normal distribution, and MC analysis using resampling with replacement (analagous to bootstrap sampling). Firecalc is much more optimisitic than the MC analysis, so I tend to be more comfortable with MC.
FIRE'd: Looks like this is close to what you're looking for.

Fred: Can you expand on what your resampled MC runs revealed?
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Old 12-08-2013, 09:07 PM   #42
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Originally Posted by FIRE'd@51 View Post
Maybe it can't be done, although I have to believe there are statistical methods that attempt to deal with the overlap problem, .... I started this thread with the hope that someone better versed in statistics than myself could opine on this subject.
OK, I'm certainly no expert with stats (I used to work with some PhD-level stats guys so I know I know don't much!), so I'll sit back and see if anyone with credentials can come up with some positive contributions. It's an interesting idea, I'm not sure if I think it can't be done because I don't know enough about stats, or because I do know enough.

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