How can you tell a good investment strategy from a bad one… perhaps statistics can provide the answer?
A recent article in The Economist provides a good introduction to some of the ways statistics can mislead the reader, as well as the analyst. It opens with an intriguing story on how you might genuinely receive an email every week, for 10 weeks in row, which proposes an investment recommendation that proves to be successful each and every time. Statistically, there is only one-in-a-thousand chance the result is down to luck, or is there?
In the end, we see that the statistics often used to try to convince us that a particular strategy is the ultimate investment solution may not be as infallible as they appear.