Something that knocks the pins out from our normal understanding of price earnings ratios, return on invested capital, discounted cash flow analysis, smart beta/factor ETFs, value at risk models (VAR) and even company financial statements
The strong bias toward believing that small samples closely resemble the population from which they are drawn is also part of a larger story
Can we improve on the accuracy of these estimates by obtaining estimates from, say, 22 leading investment banks and averaging them?
Human decisions affecting the future, whether personal or political or economic, cannot depend on strict mathematical expectation, since the basis for making such calculations does not exist.
Small samples, sample period and survivorship bias, as weaknesses in statistics, exemplify a problem in our ordinary reasoning.
The behavioral tail can wag the statistical dog
You must be logged in to post a comment.