An example of why there is money to me made in the stock market

[LA_Price]

I heard this in my stats class today and think it is a good model of stock market.

you're conducting a study with a biased coin but you don't know whether it is biased heads or biased tails. so you conduct a study. The way it works this. The first person flips the coin and has to say whether the coin is biased heads or tails. The following person will know what the previous people said but won't know what the actual outcomes were. So the first person gets a head so they say it's biased heads. Then the second person goes and gets a head so they say the coin is biased heads. Now the third person flips and gets a tails but since the previous two said heads he says it's biased heads. Then the fourth person goes and gets tails but he says it's biased heads since the previous three must have all been heads. You can see that it will be very hard for anyone to say it's biased tails because they are reacting on the incomplete information of the previous flippers.

Now if someone was to take the coin and do 100 or 1000 trials they would know pretty well the true bias of the coin which may or may not different from the results of the test.

People make decisions in the stock market very much like this coin. they don't bother to do the research for a company themselves but rather rely on the information of others who are acting on the advice of others who may or may not have done research themselves. For this reason there will always be inequity for those who are smart enought to spot it. Just an interesting example that I thought fit well here.