Have been random sampling 35 year stock returns from normal distribution for an hour and haven't yet seen a sample with Buffett returns.
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Everybody dreams of the Buffett return bt settling with high probability 5%+ returns and saving, you are going to be so well off long term.
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And the simulation is really eye opening, you can have the wackiest paths in the 35 year. Make a lot at the beginning, and then lose it all.
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Or make no progress for long time, and then jump out to amazing returns.
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Zik zak all the way through it, or have it steady and earn nothing.
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Replying to @backoftheenvelo
Inredibly non-intuitive how huge the discrepancies can be.
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Replying to @gilmourkh @backoftheenvelo
Not saying this would change the results but aren't stock returns and pricing behavior not normal? Did your distribution have fat tails?
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Replying to @Molson_Hart @gilmourkh
The parameters were from The Intelligent Asset Allocator from Bernstein, 8% average and 20% standard deviation with normal distribution.
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Replying to @backoftheenvelo @gilmourkh
Mandelbrot argued that stock market returns (price movements?) followed this distribution:pic.twitter.com/4jGmixQfQZ
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Replying to @Molson_Hart @backoftheenvelo
Nobody argues mkts are normally distributed post-LTCM, but even with those assumptions the huge variance is illustrative.
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Replying to @gilmourkh @backoftheenvelo
Not just huge, infinite! Not sure I buy it, but who knows.
5:42 PM - 17 Sep 2017
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