With Big Data Come Big Problems: Asymptotic Bias of Eigenvalues in Fixed T, Infinite N Dimensions

15.11.2024 11:15 – 12:15

RESEARCH INSTITUTE FOR STATISTICS AND INFORMATION SCIENCE: STATISTICS SEMINAR

ABSTRACT

Measuring systemic risk is key in agricultural insurance and finance and is rapidly improving with big-data technologies such as satellite data that enable collecting data at low cost and very large scale. However, this paper identifies a significant threat to estimates derived from these promising big-data sources: data with many units N yet with few time periods T can yield upward biased estimates of systemic risk. Using satellite-based crop yield predictions, we simulate and demonstrate this bias, showing that it leads to substantive overestimation of systemic risk.

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