Monday, January 13, 2014

stock price analogy

Consider a exceptionally large jar of beans with inflow and outflow taps constantly changing the number of beans in the jar. Also consider a large group of people estimating the number of beans on a ongoing basis. I would conjecture that the guesses surrounding the actual number of beans in the jar at most any given time t would fall under a bell curve distribution. I say most because occasionally, when either of the taps behave in a gusher type condition (black swan?) the Gaussian distribution will break down as the information will outpace and overwhelm the large group of people estimating.