Last Uncertainty Wednesday provided a recap on our adventures with sample means and what those implied about the difficulties of inference. Now we will look at another equally fascinating complication: inferring volatility. As the title of this initial post gives away, we will see that it is easy to make large inference errors when we are dealing with situations in which volatility is somehow suppressed. It turns out such situations are all around us all the time. Let’s work our way into this...

Last Uncertainty Wednesday provided a recap on our adventures with sample means and what those implied about the difficulties of inference. Now we will look at another equally fascinating complication: inferring volatility. As the title of this initial post gives away, we will see that it is easy to make large inference errors when we are dealing with situations in which volatility is somehow suppressed. It turns out such situations are all around us all the time. Let’s work our way into this...