Probability Distributions > Heavy Tailed Distribution
What is a Heavy Tailed Distribution?
A heavy tailed distribution tends to have very large values with many outliers (very high values). The heavier the tail, the larger the probability that you’ll get one or more very large values in a sample.
Characteristics of the Heavy Tailed Distribution:
If you take a random sample from the distribution, you’re likely to end up with a sample made up from mostly small values. For example, if you sample from the income of people in the United States, the bulk of your data will be around $50,000. However, one or two values in your sample could be ridiculously large (i.e. outliers); Bill Gates earned over $11 billion in 2013.
These large values tend to skew your sample statistics: the sample variance will probably be very large and the sample mean usually underestimates the population mean. Another couple of quirks with heavy tails:
- The Central Limit Theorem doesn’t work.
- Some moments don’t exist, so order statistics are used instead.
Heavy Tailed Distributions in the Real World
Many real world situations are heavy tailed, including:
- The top 1% of the population in the USA owns as much as the bottom 90% (Guardian).
- File sizes in computers (Columbia).
- Web page sizes and computer systems’ workloads (Stanford).
- Insurance Payouts and Financial Returns (Wolfram).
Heavy Tailed Distribution Examples
This family of distributions is used in assessing product reliability to model failure times and life data analysis.
The Cauchy has fatter tails and a taller peak than a normal distribution. It is widely known for the fact that it’s expected value does not exist.
Log normal distribution.
A lognormal (log-normal or Galton) distribution is a probability distribution with a normally distributed logarithm.
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