In this section, we first discuss randomness and its various sources. We then discuss how performance can depend on skill and luck, where luck is modeled as randomness. We then learn a basic random walk model, which we apply to the Efficient Market Hypothesis, the ideas that market prices contain all relevant information so that what's left is randomness. We conclude by discussing finite memory random walk model that can be used to model competition. The reading for this section is a paper on distinguishing skill from luck by Michael Mauboussin.
Mauboussin: Skill vs Luck
2013-12-03 (60min) Coursera open course: Model Thinking by Scott E. Page Start from 10.07.2013, will end on 12.16.2013 Link: https://class.coursera.org/modelthinking-005/class/index;
Section 15:Randomness and Random Walks
In this section, we first discuss randomness and its various sources. We then discuss how performance can depend on skill and luck, where luck is modeled as randomness. We then learn a basic random walk model, which we apply to the Efficient Market Hypothesis, the ideas that market prices contain all relevant information so that what's left is randomness. We conclude by discussing finite memory random walk model that can be used to model competition. The reading for this section is a paper on distinguishing skill from luck by Michael Mauboussin. Mauboussin: Skill vs Luck