It begins
"You′re invited to a talk by a hedge fund manager who was a partner at a fund that famously flopped about twenty years ago. You turn up, hoping to hear some valuable insights, or at least some entertaining tales, but instead you are offered a stake of $25 to take out your laptop to bet on the flip of a coin for thirty minutes. You′re told the coin is biased to come up heads with a 60% probability, and you can bet as much as you like on heads or tails on each flip. You will be given a check for however much is in your account at the end of the half hour. ....."
Find the paper here https://papers.ssrn.com/sol3/papers.cfm ... id=2856963
Academic paper: very interesting
I guess this is the paper the ft article was based on:
viewtopic.php?f=36&t=12820
Love how some people still bet on tales.
viewtopic.php?f=36&t=12820
Love how some people still bet on tales.
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marksmeets302
- Posts: 527
- Joined: Thu Dec 10, 2009 4:37 pm
I did that same game with a bunch of colleagues about 15 years ago (*). After a couple rounds of play they were all broke.
It's funny how so few people have intuitive understanding about how this works. Luckily there's the Kelly criterion.
(*) with the exception that we worked with virtual money, being the cheapskate that I am.
It's funny how so few people have intuitive understanding about how this works. Luckily there's the Kelly criterion.
(*) with the exception that we worked with virtual money, being the cheapskate that I am.
This article exposes my own psychological tendencies. My first reaction was to not believe it was a 60/40 split in favour of heads and assume it was 50/50. With that being said, my strategy would of been to bet lots of small stakes on heads.
In my mind the probability would be between >=50% and <=60% which is the range between my own logical assumption and supposedly 60/40 split .
At worst this would break even long term so an acceptable risk.
In my mind the probability would be between >=50% and <=60% which is the range between my own logical assumption and supposedly 60/40 split .
At worst this would break even long term so an acceptable risk.
Great experiment! Just finished reading a book on similar subjects. Would recommend to anyone interested in human mind fallacies, especially when it comes to probabilities and gambling https://www.amazon.co.uk/Squares-Sharps ... 1843448580
Hi
I thought Id capture this in an excel sheet for people not familiar with Kelly...
Plug in your probabilty in L2 (currently favours Heads at 52% of the time)
Bank start £100 in L3
To refresh the sheet change the number in D10
Calculates over 1000 races..(ie a month and a half)..
Change the probabilty (ie the edge) to anything over, say 0.53 (ie the value over the 0.5 equals the edge) and see it take off!
Extend the rows down if you will, circa 8500 races in a year
See what you could do with a 3% edge in one year
(theoretical of course, as you will never get enough of your stake matched as the compounding effect takes place)...
regards
Peter
I thought Id capture this in an excel sheet for people not familiar with Kelly...
Plug in your probabilty in L2 (currently favours Heads at 52% of the time)
Bank start £100 in L3
To refresh the sheet change the number in D10
Calculates over 1000 races..(ie a month and a half)..
Change the probabilty (ie the edge) to anything over, say 0.53 (ie the value over the 0.5 equals the edge) and see it take off!
Extend the rows down if you will, circa 8500 races in a year
See what you could do with a 3% edge in one year
(theoretical of course, as you will never get enough of your stake matched as the compounding effect takes place)...
regards
Peter
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ShaunWhite
- Posts: 9731
- Joined: Sat Sep 03, 2016 3:42 am
Heads or Tails, Red or Black....and now Binary Options
The author was on the Podcast : Business of Betting.
I thought it was a v informative, and thought provoking listen.
https://itunes.apple.com/au/podcast/bus ... 27895?mt=2#
The updated paper, was shared here : https://papers.ssrn.com/sol3/papers.cfm ... id=2856963
Allocation of resources, to +ev spots, is not just an academic excercise. More and more, I am thinking, about how much to commit to a market, and realising, in general, I have been vastly, under-exposed.
The author runs an investment firm, called Elmfunds, and other interesting stuff, is on the website. .. elmfunds.com/blog
I thought it was a v informative, and thought provoking listen.
https://itunes.apple.com/au/podcast/bus ... 27895?mt=2#
The updated paper, was shared here : https://papers.ssrn.com/sol3/papers.cfm ... id=2856963
Allocation of resources, to +ev spots, is not just an academic excercise. More and more, I am thinking, about how much to commit to a market, and realising, in general, I have been vastly, under-exposed.
The author runs an investment firm, called Elmfunds, and other interesting stuff, is on the website. .. elmfunds.com/blog
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stueytrader
- Posts: 863
- Joined: Tue Dec 15, 2015 6:47 pm
Very interesting - shows both the possible upsides and downsides of having/finding an 'edge'!