[YouTube] Correlation measures are misused in the presence of nonlinearities

A VERY SIMPLIFIED TUTORIAL (VERY SHORT)
Correlation measures are misused in the presence of nonlinearities.

(How a measure of unintelligence can give the illusion of high correlation with performance.)

Correlation measures are not supposed to be used in the presence of nonlinearities. When 2 variables correlate half the time (in a symmetric way around the mean), correlation will not be 50% but will show ~90%. Part of debunking IQ studies. If IQ works for disabilities but does not correlate with success, there is an illusion of correlation because of the biases in the metric.

Fake Regression by Psychologists

Fake Regression by Psychologists (Fooled by Randomness), Based on the paper on Trust by Nicolas Baumard

How to detect fake regressions. Never pay attention to numbers before looking at the graph.

First I show how to spot fakes in a sinister paper by Nicolas Baumard et. al. linking people’s physical traits to (un)trusworthiness.

Second, more technically, I derive the distribution of the slope between two random variables and show how one can game it.

[YouTube] Ellipticality (Technical)

Modern financial theory assumes that distributions are elliptical. We show what happens if the assumption doesn’t hold. And the assumption doesn’t hold.

Diversification does NOT reduce risks in the financial market; it causes near-certain long term blowups under any leverage.