Tuesday, August 25, 2009

Detecting Random Events

I have been teaching accounting and finance for many years. One issue that continues to amaze me is that students do not properly understand what randomness is and are unable to distinguish between a random set of events and a non-random set of events. Below are two sets of results from tossing a coin (H = heads, T = tails), one set is random, the other set is non-random.

Set 1 Set 2
H H
H T
T T
H H
H T
H H
T T
H T
T H
T T
H H
H T
T T
H T
H H
T H
T T
H H
T T
H H
T T
T H
T T
T H
H H
T H
T T
T H
T T
H T
H H
T H
T T
T H
H T
H H
H T
T H
T T
T H




Send me an email (see below) with your selection of which set is the random set and, if you can, tell me why it is random and the other set is non-random. No prizes, just a warm inner feeling. I will answer your emails and tell you if you are correct.



My email address is: andrew [dot] read [dot] canberra [at] gmail [dot] com (written this way to reduce the risk of spam).


The reason this inability to detect randomness is a concern is that naive (and perhaps professionals as well) investors can be conned by charlatans selling bogus charting and other technical analysis systems.

39 comments:

  1. 從人生中拿走友誼,猶如從生活中移走陽光........................................

    ReplyDelete
  2. 每個人生命中都可能遇到貴人,這些貴人不一定真的尊貴,他可能是陌生人,也可能是你的敵人。..................................................

    ReplyDelete
  3. 喜歡看大家的文章,每篇都是一個故事,都是一種心情~~祝大家開心愉快 ........................................

    ReplyDelete
  4. IT IS A VERY NICE SUGGESTION, THANK YOU LOTS! ........................................

    ReplyDelete
  5. 閱讀您的BLOG文章,真是件快樂的事!........................................

    ReplyDelete
  6. Joy often comes after sorrow, like morning after night.............................................................

    ReplyDelete
  7. 成熟,就是有能力適應生活中的模糊。..................................................

    ReplyDelete
  8. 一個人的價值,應該看他貢獻了什麼,而不是他取得了什麼....................................................................

    ReplyDelete
  9. 人有兩眼一舌,是為了觀察倍於說話的緣故。............................................................

    ReplyDelete
  10. 感謝您費心的分享您的生活!讓我也感同身受!..................................................................

    ReplyDelete
  11. 人若賺得全世界,賠上自己的靈魂,有什麼益處?......................................................

    ReplyDelete
  12. Give a fool enough rope and he will hang himself...................................................

    ReplyDelete
  13. 與人相處不妨多用眼睛說話,多用嘴巴思考,............................................................

    ReplyDelete
  14. 知識可以傳授,智慧卻不行。每個人必須成為他自己。. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    ReplyDelete
  15. 人生中最好的禮物就是屬於自己的一部份..................................................

    ReplyDelete
  16. 培養健全孩子最好的方法是父母先成為健全的人。......................................................................

    ReplyDelete