[ericlambi]

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Inferential statistics are used to draw inferences about a population from a sample. Many examples would be manufacturing related. For example, the weight or dimensions of any particular widget coming off an assembly line. Also, behavioral studies, such as what does the effect of drinking 12 Heineken's have on one's ability to correctly spell their name in the snow. That's probably a bad example, but you get the idea.

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and

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I remember the first time I opened Aleo's spreadsheet and saw confidence intervals. My initial reaction was to laugh. Results of poker tournaments are not random variables. The data distribution of 1st, 2nd, 3rd, other certainly does not represent a normal distribution. I even believe there is a degree of skill involved in the actual outcome of these poker tournaments. Skill is not really something that statisticians believe they can analyze to any degree of confidence.

A confidence interval can not be computed under the basis of these conditions. Period. The confidence intervals that are being quoted are a lot like saying that based on the last 100 years, I have a 95% confidence that the Chicago Cubs will win between 54 and 111 games this year. It is kinda cute, but means nothing.


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If you actually believe these things, you either didn't take the time to think this through, or you need to go back to statistics school.

This is the exact same analysis done to evaluate past performance (and predict future performance) of mutual fund portfolio managers and day traders. If you believe there is no skill involved in making investments that outperform the general market, you are wrong. If you believe these professionals aren't continually evaluating their own job performance and finding ways to improve, you are wrong. If you believe that this analysis sort of analysis is not appropriate in this situation, you are VERY wrong.

As a matter of course, when predicting the expected return of investments given past data, you never have the luxury of hundreds of data points. You are lucky if you have N=20. Yet useful insight is gathered every day from this sort of data.