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  • Why quadratic log-log depen...
    Aguilar, Sean R; Kreinovich, Vladik; Pham, Uyen

    Asian journal of economics and banking, 01/2021, Letnik: 5, Številka: 1
    Journal Article

    PurposeIn many real-life situations ranging from financial to volcanic data, growth is described either by a power law – which is linear in log-log scale or by a quadratic dependence in the log-log scale. The purpose of this paper is to explain this empirical fact.Design/methodology/approachThe authors use natural scale invariance requirements.FindingsIn this paper, the authors used natural scale invariance requirement to explain the ubiquity of quadratic log-log dependencies. The authors also explain what to do if quadratic log-log models turn out to be insufficiently accurate. In this case, scale-invariance requirements lead to dependencies which in the log-log scale take cubic, 4th order, etc. form.Originality/valueTo the best of authors’ knowledge, this is the first theoretical explanation of the empirical quadratic log-log dependence.