The Black Swan: The Impact of the Highly Improbable · chapter 8 · id the-black-swan-c8-01-benoit-mandelbrot-showed-in-19
“Benoit Mandelbrot showed in 1963 that cotton prices follow fat-tailed distributions, not Gaussian curves. His work was ignored by mainstream finance for decades in favor of the mathematically convenient but empirically wrong Gaussian framework.”
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Mandelbrot (1963/2001), 'The Variation of Certain Speculative Prices', Yale Mathematicscheck errored · retry queued
Mandelbrot's 1963 paper in Journal of Business analyzed cotton price data from 1900-1960, demonstrating stable Paretian (fat-tailed) distributions with tail exponent alpha approximately 1.7.
Walter (2024), 'Benoit Mandelbrot in Finance', HAL Sciencesource alive
Mandelbrot's financial work was initially recognized (Fama's 1963 thesis tested it) but was gradually sidelined as the Black-Scholes framework, which requires Gaussian assumptions, became dominant in the 1970s-1990s.
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