From: John Conover <john@email.johncon.com>
Subject: Re: QUESTIONs: Probability of 1837/1929 type U. S. downturn, Some
hypotheses to chew on
Date: 26 Oct 1999 18:32:34 -0000
Hyman Blumenstock writes:
>
> The "stock market" is essentially a useless institution
> whose function is identical with that of gambling casinos --
> wherein money is shifted from the hands of the losers into
> the hands of the winners.
>
Except that the chances of a win on any roll of the dice|stock is 2%
better for stocks than dice. (About 49% for dice-depending on which
casino-about 51% on the daily closes for stocks listed on the US
equity markets throughout the 20'th century, ie., long term, stocks
are a positive-sum game, and craps is a negative-sum game, unless the
casino doesn't exist or make a profit, in which case it is zero-sum
game.)
Note that there exists a strategy to preclude the possibility of ever
going bust in positive-sum games, (fractional wagering through
hedging,) but not in negative-sum or zero-sum games, where the best
one can do is a devil's staircase scenario, where more oft than not,
one will loose, but one has maximized one's chance of winning,
although it is less than 50/50.
John
--
John Conover, john@email.johncon.com, http://www.johncon.com/