Winning the Lottery - A Random Walk Down Wall Street
The entire concept of being able to use a computer to Improve Your Chances of Winning the Lottery is bolstered by an understanding of the true meaning of the word Random. With that in mind, I’m going to continue my Random discussion with another real world example that supports my position that Random means opportunity; The Stock Market.
It wasn’t too many years ago that the common belief was that stock prices were a random game of chance. This idea was formally put forth in 1973 in a book by Burton Malkiel called ‘A Random Walk Down Wall Street’. Malkiel’s premise was that the profits earned from carefully selecting five stocks based upon a detailed analysis of their past performance would fare no better than five randomly selected stocks.
For many years the general public seemed to accept this point of view and left stock market investing to the professionals. Today, however, from the top Wall Street investment firms down to the individual investor, no one is taking a random walk.
Stock analysis software abounds. Hundreds of millions of dollars are spent each year on computer analysis of past stock prices with the overall goal of predicting tomorrow’s prices. In fact, today, to invest in the stock market without thoroughly analyzing the stock’s past performance would be considered amateurish, naïve and foolhardy.
So, what’s the secret to successful stock market investing? If you invest intelligently, study the past performance of each stock and apply a basic understanding of probability you can gain an advantage.
This is my philosophy for playing the lottery. How is yours different? The same?
Discussion Area - Leave a Comment