Wednesday, September 22, 2010

Benford's law

Interesting article in wikipedia.

Benford's law

Benford's law, also called the first-digit law, states that in lists of
numbers from many (but not all) real-life sources of data, the leading
digit is distributed in a specific, non-uniform way. According to this
law, the first digit is 1 almost one third  of the time, and larger
digits occur as the leading digit with lower and lower frequency, to the
point where 9 as a first digit occurs less than one time in twenty.

The distribution is as follows:
1     30.1%
2     17.6%
3     12.5%
4     9.7%
5     7.9%
6     6.7%
7     5.8%
8     5.1%
9     4.6%

Is it useful? Yep.
Following this idea, Mark Nigrini showed that Benford's law could be used
as an indicator of accounting and expenses fraud.

In the United States, evidence based on Benford's law is legally admissible
in criminal cases at the federal, state, and local levels.

So, whenever you're about to fake some data - use digits between 5 and 9
carefully. You've been warned.

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