- Gambler’s Fallacy in behavioral finance 2) Mean Reversion Spread Analysis in fixed income. 3) Contrarian Strategy in equity 4) Constant Mix Strategy in execution/rebalancing. 5) Tobin’s Q in Econ. Any similarity among them?

they all have the letter e

Mean Reversion

I think that gamblers have no fallacy, the only problem is the limited availability of capital…Give me the CFA exam fees of 100.000 people and I’ll show you.

Gamblers fallacy is due to small sample size. A man playing roulette sees black hit five times in a row and thinks red HAS to hit next. What he doesn’t understand is the odds are still 50/50 and not tilted in reds favor.

Small sample size has nothing do with it. For a wheel that is not gamed by the casino , every spin has equal probability . regardless of sample size.