Financial Daily from THE HINDU group of publications
Sunday, Apr 03, 2005
Financial Daily from THE HINDU group of publications Sunday, Apr 03, 2005 |
|
|
|
|
|
Investment World
-
Economics Columns - Simple Economics The `random' conundrum B. Venkatesh
A coin toss is an example of randomness. The result of the second toss is independent of the first toss that of the third toss is independent of the second toss and so on. A system is said to be random if what it does next is not dependent on what it did in the past. But is a coin toss truly random? The force with which you throw the coin in the air and the wind speed (to name a few factors) decide on whether you get heads or tails. Because you cannot easily measure all the factors, you conclude that the process is random. But what if you had all these details? The result can be predicted with certainty. Mathematicians would call such a non-random process as deterministic. The physicists would call it a classical mechanical system. Picture this. You are flying in a helicopter. Down below, you see two cars speeding at each other towards an intersection. The cars crash head-on, as the drivers are unaware of each other. The accident may appear random to the casual observer. To you, it was a certainty because you were able to view the entire scene from the helicopter. The stock markets, a coin toss, the Blackjack, the Russian roulette and any other game you may play at the casino are no different. None of them are truly random! We just lack adequate information to determine their behaviour. Needless to say, those who have adequate information on the market, the card game or the roulette can become rich.
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2005, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|