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Comment by vegabook

The analogy incorrectly compares a binary outcome (cancer / no cancer) with a continuous variable (stock price returns, which may have skewed magnitudes depending on upside or downside). So while it is nominally correct about the formula for "stocks up" or "stocks down", it does not help for an actual trading situation where "stocks down" could have a negative return mean much larger than the corresponding positive mean return of "stocks up", for example.
parent vegabook 11 years ago

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