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So he is falling for a myth, yet what you're referring to is the Efficient Market Hypothesis, does the word "hypothesis" ring any bells for you? Even more so, does the fact that a theory that originated in the 1960's, still bares the name EMH. Almost 60 years on and it still hasn't been proven. Your thought process seems incredibly flawed, the idea you have about coin flipping being at all similar to stock picking is laughable. And this to me would indicate that whilst you may believe that your analogy is a good indication of survivorship bias, it is clear to me that you are suffering from confirmation bias. You're looking for examples that suit your belief, and ignoring some basic elements. Let's look at this one seriously, coin-flipping is an statistically independent event, whilst if we apply even some fundamentals of finance and EMH (which I don't agree with, btw), we will quickly find ourselves in the realm of correlation. I never stuck around Uni long enough to get deep into this stuff, but you could do with some reading on the CAPM model. To quote from wikipedia on the CAPM model: "Financial correlations play a key role in modern finance." You only have to look at the fact that many companies have been put out of business by companies like Amazon, which means that at the very minimum, you have at least ONE external factor that has an influence on the performance and price of other securities. And this is all without even starting on the even more hilarious notion that information across the market is symmetrical, that's right, I as a lowly consumer exchange peasant, have the exact same information available to me as Jim Simons and the team at RenTec. Who's Medallion Fund, by the way, returned a 35% CAR over a 20 year period. You have to be mental to believe the shit they teach in undergraduate Finance. |