http://www.cbsnews.com/8301-505123_162-57567102/why-investors-shouldnt-follow-their-gut/
the piece discusses the all too human tendency to put too much emphasis on recent/short term results and ignore long term evidence
Best wishes
Larry
If you're like most people, you would probably guess bag A, since 80 percent of the chips you withdrew were red, versus just 67 percent from bag B. However, you're more likely to be right if you chose bag B. The reason is that because the sample size from bag B is much larger, you have more confidence in the result.
I'm not sure I follow the logic of the statistics here. You have two estimates - for bag A the estimate is 0.8 (with a large confidence interval because of the small sample size), while for bag B the estimate is 0.67 (with smaller CI because of the larger sample). But the best estimates you have are still 0.8 and 0.67; I don't see that the available data supports the idea that the true fraction for B is greater than the true fraction for A.
It is because you are told that one bag is 1/3 red and one bag is 2/3 red.
Return to Investing - Theory, News & General
Users browsing this forum: Alex Frakt, littlebird, tyler_cracker and 30 guests