Statistical String Theory for Courts: If the Data Don't Fit

Statistical String Theory for Courts: If the Data Don't Fit

David F. Babbel
Financial Services

This article provides courts with an important new tool for applying the correct probability distribution to a given legal question. In areas as diverse as criminal prosecutions and civil lawsuits alleging securities fraud, courts must assess the relevance and reliability of statistical data and the inferences drawn from them. But, courts and expert witnesses often make mistaken assumptions about what probability distributions are appropriate for their analyses which can lead to invalid factual conclusions and unjustified legal outcomes.

To deal with this problem, this paper proposes the use of a unifying "statistical string theory" - the g-and-h distribution - in legal settings. Applying the g-and-h distribution can alleviate judicial fact finders of the difficult task of trying to correctly select among competing distributions. The paper also reports on the successful use of this statistical tool in a trial setting for financial data analysis - showing that it can produce more accurate inferences, than those drawn from alternative distributions, and these differences can be judicially decisive.

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