Saturday, August 10, 2013

Some practical statistics

Everyone has heard the phrase "statistics lie!"  I say statistics usually successfully lie to people who don't understand statistics.  You don't have to be a math geek to gain a practical understanding of statistics that will prevent people from using statistics to take advantage of you.

Everyone can and should understand these articles at Better Explained.com.  There are some articles at the site that are not totally correct but these are very sound.

The "Monty Hall" problem
The "Birthday Paradox"
The "Rule of 72"


I did find an article about the stock market at the site that is not entirely correct.  The article implies that the stock market meets the requirements of a "free market" from classical economics because the prices of stocks is transparent.  In fact it has been shown that the stock market does not meet the requirements of a free market for a variety of reasons, especially information asymmetry regarding the economy in general and the companies underlying the stocks.

In other words, even though stock market prices are transparent, big players such as investment banks and Warren Buffet have a ton of other information that other investors do not.

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