PT - JOURNAL ARTICLE AU - Kevin Dowd AU - John Cotter AU - Chris Humphrey AU - Margaret Woods TI - How Unlucky Is 25-Sigma? AID - 10.3905/jpm.2008.709984 DP - 2008 Jul 31 TA - The Journal of Portfolio Management PG - 76--80 VI - 34 IP - 4 4099 - https://pm-research.com/content/34/4/76.short 4100 - https://pm-research.com/content/34/4/76.full AB - This article examines the likelihood of high-sigma loss events, paying particular attention to the so-called 25-sigma events which a number of financial institutions have allegedly experienced in the recent financial turmoil. The authors discuss several well-known cases and their media coverage, and then examine the probabilities of such events and the periods of time that would elapse before one would expect to witness them. They find that 25-sigma events are far less likely to occur than recent discussions would suggest—so much so, in fact, that they are literally incredible.TOPICS: Accounting and ratio analysis, statistical methods