Humans have an evolutionary incentive to recognize patterns. The same mechanisms that helped early humans avoid snakes and other predators are still part of our constitution today. One of our in-built biases is the human tendency to see patterns where none exist. Clustering illusion is our bias towards under-predicting the variability of random – or […]
The Economist posted a not-so-interesting graph relating a year’s stock market returns to it’s Chinese Zodiac sign. I would imagine that a random number generator making up returns for clusters of numbers of years since 1900 and ranking the outcomes would produce a similar outcome… but let’s play devil’s advocate and see if there is something to be said from these numbers.