The Cramér‐Rao lower bound on variance: Adam and Eve's “uncertainty principle”

Abstract

Purpose

The editorial aims to describe the importance of the Cramér‐Rao lower bound (CRLB) in matters of risk, and consider why this inequality generally receives less attention than it deserves.

Design/methodology/approach

The CRLB is discussed in the context of other celebrated equations, one of which (Heisenberg's uncertainty principle) is actually implied by the CRLB. A hypothetical world with no randomness on the macroscopic level is then imagined, and the role of the CRLB in that world is considered.

Findings

It is found that in a world with no macroscopic uncertainty, the CRLB would play a central role in describing the “counterintuitive” concept of randomness.

Originality/value

The editorial identifies and explores an important epistemological result that is under‐appreciated.

Citation

Powers, M.R. (2006), "The Cramér‐Rao lower bound on variance: Adam and Eve's “uncertainty principle”", Journal of Risk Finance, Vol. 7 No. 3, pp. 233-236. https://doi.org/10.1108/15265940610681637