Re:Trading Is Hazardous to Your Wealth [pdf] (2000)
by im3w1l on Thursday May 14, 2020 @04:17PM
(#23184834)
Don't underestimate how many people are on the brink of suicide anyway, and where a 1/6 chance of the good life seems like a good deal. Oh wait 5/6. Well that just makes it even better.
Re:Trading Is Hazardous to Your Wealth [pdf] (2000)
by alasdair_ on Thursday May 14, 2020 @04:29PM
(#23184969)
>not understanding that there is a huge difference between expected value and ergodic properties
Can you expand on this? Are you claiming that the stock market is ergodic, or that it is not?
Re:Trading Is Hazardous to Your Wealth [pdf] (2000)
by TrinaryWorksToo on Thursday May 14, 2020 @05:20PM
(#23185638)
Read Nassim Taleb's essays.
https://medium.com/incerto/the-logic-of-risk-taking-107bf410...
Re:Trading Is Hazardous to Your Wealth [pdf] (2000)
by H8crilA on Thursday May 14, 2020 @05:11PM
(#23185511)
This applies much mote to actors within a securities market (both investors and issuers), not necessarily to this or that market itself. Most people's behavior is non ergodic.
Though I suppose even if you broaden "the market" even to all of civilization - it is also non-ergodic, at least since nukes and hydrogen bombs were created.
It exist due to "absorption barriers", due to the ergodicity of the process - betting too big and hitting "uncle points".
It's a bias present in most people, especially otherwise intelligent people: not understanding that there is a huge difference between expected value and ergodic properties. Between expected returns and risk. Just look up what VaR is, the concept is ridiculous, yet so widely used.
How much should the win (5/6) value be in a game of Russian roulette for you to play the game? The answer is that for most people it is not any number, that value doesn't exist.