WSJ report on volatility

Discussion in 'Wall St. News' started by lindq, Feb 10, 2007.

  1. This analogy is correct if price changes are completely random.
     
    #11     Feb 11, 2007
  2. lindq

    lindq

    NPR had a recent report on randomness. A math professor told his students that he was going to leave the classroom, andwhile he was gone he wanted some of his students to flip a coin and write on the blackboard an X for a tail and an O for a head, creating a list of Xs and Ox.

    Then he asked the rest of the students to write down a random series of Xs and Os, pretending that they were flipping the coin.

    He did this exercise number of times, and each time he was able to tell which list represented the actual coin toss, simply by looking at the two lists.

    He explained that the difference in the lists was clear - the list of the real coin toss had many more runs of only Xs or Os, and was not so random as the imaginary list.

    His point was that repeated occurances of such events - many heads or tails, or black on a roulette wheel - is not that unusual, and is to be expected in planning.
     
    #12     Feb 11, 2007