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#1
08-09-2005, 09:51 AM
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Major Problem with Bill Chin\'s Article on Variance
I believe there is a major, possibly even fatal flaw with all the work currently done on gambling variance - the use of standard deviation as the measure of the variance being measured. SD assumes the distribution of observations is symmetrical around the mean; i.e., that the normal distribution is the correct statistical model to use. However, this is often not the case: a successful player will have a significantly positively skewed distribution of returns, and vice versa for the consistent loser. This means that even if the better player has a high SD, much of it will be "good" variance. Again, vice versa for the loser. The conclusion is that a better measure of this variance is the 2nd degree lower-partial moment (LPM2). LPM2 essentially captures just the variances below the mean and, since it is distribution-free it avoids the fatal flaw of SD in an asymmetric world. In the financial investment world where this measure has replaced SD, LPM2 is known as "Downside Risk", and has now become the risk measure of choice for the non-normal investment distributions that are typical for derivative and hedge fund strategies. For addition material on this concept see my website www.investmenttechnologies.com.
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#2
08-09-2005, 01:06 PM
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Finally - A Real World Perspective
I agree with this.
Finally a lone voice of reason... In repsonse to the chorus that... "You gotta play 5,000,000 SNGs before your results mean anything". Your point in analogous to using the Sharpe Ratio... To quantify risk/reward for a hedge fund... Which is ridiculous... Because the Sharpe Ratio penalizes upward/downward variance equally. I manage a small hedge fund (about $1 million)... And if I'm averaging a 25% return... But have a big year and do 50%... The Sharpe Ratio penalizes me for "variance". Simply analyzing your drawdowns... To quantify the most important thing - "downside risk"... And is far more meaningful then misapplied stats. You are very perceptive to have a gut feeling... That the way the "geniuses" around here... Apply off-the-shelf freshman stats... To very exotic games such as SNGs... Is equally ridiculous. The dogma they push... Would result in the conclusion... That winning the WSOP is not "statistically significant"... Becuase you only play about (a guess) 2000-3000 hands to win. I suspect that smart, good players... Have far less variance... Than what is "conventional wisdom" around here. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]
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#3
08-09-2005, 06:49 PM
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Re: Finally - A Real World Perspective
[ QUOTE ]
I suspect that smart, good players... Have far less variance... Than what is "conventional wisdom" around here. [/ QUOTE ] And... I suppose... The fact that smart, good players... with significant gains... over a large sample of hands... have had the significant downswings... predicted by the "freshman statistics"... and, in fact, are usually the ones warning about variance... means nothing.
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#4
08-10-2005, 08:56 PM
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It\'s Not All Variance
Dude...
This an internet forum filled with sociopaths... As are 100% of internet forums. There is constant gamesmanship going on around here... With the veterans abusing the newbies. Misusing statistics to invalidate other people's results... Is part of that gamesmanship. This place gets better every day... Because I now have about 50 nut bars on ignore. Your assumption that a "good player's" downturn... Is automatically due to expected variance... Is ridiculous. It's equally likely that the player in question... Is bored... Has a drinking/drug problem... Is suffering from erectile dysfunction... Has emotional problems or personal crises... Needs to have his medication adjusted... Is watching porn while he 4 tables... Or all of the above. The variance in SNG play is not very high... Maybe a 20 buy-in downswing every few months... On the backdrop of a 15-20% ROI... With no significant capital investment. It's hard to imagine a better business model. I trade about $2,000,000 in stock every day... And have been dealing with risk and variance... In a ** real world way ** for 10 years... So I have a better gut feeling... About what is statistically bogus... Than some egomaniacal grad student. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]
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#5
08-10-2005, 09:33 PM
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Re: It\'s Not All Variance
[ QUOTE ]
gut feeling [/ QUOTE ] Gut feelings are meaningless in statistics. Use facts or actual theories to back up your arguments. I saw neither in your post. All you did was insult everyone who actually posted facts and/or theories without providing any reasonable alternatives of your own. I'm inclined to listen to people who will actually discuss issues more than those who throw around insults consisting of vague assertions and a murky claim of expertise.
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#6
08-10-2005, 10:06 PM
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Response To Ad Hominum Attack By Angry Cola
[ QUOTE ]
[ QUOTE ] gut feeling [/ QUOTE ] Gut feelings are meaningless in statistics. Use facts or actual theories to back up your arguments. I saw none of that in your post. All you did was insult everyone who actually posted facts and/or theories without providing any reasonable theories and/or facts of your own. I'm inclined to listen to people who will actually discuss issues more than those who throw around insults with nothing behind it besides vague assertions and a murky claim of expertise. [/ QUOTE ] Sir, it is those exact "gut feelings"... That separate a Poker Champion... For the also rans. I have a degree in Computer Science... With a heavy emphasis on stats/mathematics... From the University of Toronto. I have made over 200,000 trades on the NYSE... Over the last 10 years... And make a very good living... Using very sophisticated quantitative analysis. The stock market world is overrun... With completely bogus statistical fallacies... That are packaged and marketed as "financial products"... Designed to fleece the average investor. The vast majority of "truth" out there is nonsense. So the ability to dismiss such nonsense... In 5 minutes... Without resorting to complex, time consuming analysis... Is the ** essence of business/life experience **... Which would obviously be lacking... In a student who has never had a serious job... Or never run a successful business. Angry Cola, Why would you take the time... To send me a bizarre email yesterday... Criticizing my writing style? Shall I post your email? Mr. Sklansky has made this forum a bastion of free speech... And you don't like it. There can be a fine line between being a mod... And being an ** angry stalker **. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]
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#7
08-10-2005, 11:19 PM
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Re: It\'s Not All Variance
[ QUOTE ]
The variance in SNG play is not very high... Maybe a 20 buy-in downswing every few months... On the backdrop of a 15-20% ROI... With no significant capital investment. [/ QUOTE ] Again you're making statements without knowing what the [censored] you're talking about. Have you spent much time in the STT forum? The simulations using SD and ROI (the STT equivilent of winrate) show larger than 20 buy-in drops. And guess what. VERY GOOD STT PLAYERS HAVE SHOWN THOSE SAME LARGER DROPS. Have you seen posts by IrieGuy? ZeeJustin? Here's a snippet from ZeeJustin's report about his 1,000 SnG in a month quest: ------ My goal was to make 30k in this quest, so things were going very well, until they took a turn for the worse. After that, I went on the biggest downswing I have ever had at the $200+15 level, and lost $8,500. ------ That's a 39 buy-in downswing. And this is from a guy who made almost $30,000 playing those 1,000 $215 SnG's in a month. I'm sorry to burst your bubble with real-world results. I agree that SnG's are a great deal. I play them myself. But, I don't care what you think about your "gut feeling" for this stats stuff. Real world results agree with the "freshman statistics" and disagree with your "gut".
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#8
08-11-2005, 12:11 AM
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True Confessions of Variance Obsession
So I said 20 buy-in drawdown...
And you found one that was 39... At a completely different level. How does that invalidate my point... That low end SNGs are a very low risk business proposition? And exactly why is a 20-30 buy-in downswing a disaster? Seems pretty normal to me. I've read several articles on ZeeJustin's web site... And he is definitely not playing Party 22s. The higher you go... The lower your ROI... The higher your variance... The greater your potential downswings. It also matters if you play a very aggressive push game... As opposed to using more finesse. I have a database of about 2000 SNGs... Mostly Party 22s and 33s from June-Aug ... And then I label all the Party Leaderboard guys. When I set the minimum to 10 tourneys played... I'm left with 33 players. Of these 33... 10 are June or July Top 100 Leaderboard players... With tournies played ranging from 10 to 50. Of these 10... 7 are way up, 2 break even... And only one is on a 10 game downturn. As a group these 10 people (9 guys and 1 lady)... With a sample size of about 200 tournies... Are just ** totally cleaning up **... Just crushing the weak opposition. My personal biggest downswing so far is 5-6 buy-ins... Which is virtually erased by 1st place finish. This is risk? I need fancy stats for what? I just don't see it... Unless you are a homeless man with $200 in your shoe. At the low end Party SNGs... The Leaderboard players TOTALLY OUTCLASS their opposition... Play 30-40 per day... And just leave variance in the dust. The only people sweating variance... Are the marginal, undercapitalized subsistence players. You know... The ones that shouldn't be trying to play poker for a living. Are you one of those guys? Don't be. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]
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#9
08-19-2005, 07:49 AM
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Re: It\'s Not All Variance
[ QUOTE ]
Dude... This an internet forum filled with sociopaths... As are 100% of internet forums. There is constant gamesmanship going on around here... With the veterans abusing the newbies. Misusing statistics to invalidate other people's results... Is part of that gamesmanship. This place gets better every day... Because I now have about 50 nut bars on ignore. Your assumption that a "good player's" downturn... Is automatically due to expected variance... Is ridiculous. It's equally likely that the player in question... Is bored... Has a drinking/drug problem... Is suffering from erectile dysfunction... Has emotional problems or personal crises... Needs to have his medication adjusted... Is watching porn while he 4 tables... Or all of the above. The variance in SNG play is not very high... Maybe a 20 buy-in downswing every few months... On the backdrop of a 15-20% ROI... With no significant capital investment. It's hard to imagine a better business model. I trade about $2,000,000 in stock every day... And have been dealing with risk and variance... In a ** real world way ** for 10 years... So I have a better gut feeling... About what is statistically bogus... Than some egomaniacal grad student. rm+ [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [/ QUOTE ] Do you guys know that kid on Malcolm in the Middle? The one that has some kind of lung disorder so he can only say a few words at a time before gasping for more air? I kind of got the feeling that kid was talking to me just now. 2nd
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#10
08-27-2005, 12:27 AM
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Re: Finally - A Real World Perspective
[ QUOTE ]
I manage a small hedge fund (about $1 million)... And if I'm averaging a 25% return... But have a big year and do 50%... [/ QUOTE ] [ QUOTE ] I trade about $2,000,000 in stock every day... And have been dealing with risk and variance... In a ** real world way ** for 10 years... [/ QUOTE ] With those returns and over ten years, why do you only manage $1M... And just so we're clear, is that Canadian or USD$?... Canadian methinks... And is that $1M equity or levered?... Are you really turning over your book every day? Please.
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Hybrid Mode
