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The Outliers Are Where the Answers Lie

From NY Times:

It’s always seductive to know where one stands in relation to the average. As an overly confident college freshman, the first time I received a below-average score on an exam was a needed wake-up call. Today, I find it encouraging to read that I exercise more than the average woman my age. Averages are useful because many traits, behaviors and outcomes are distributed in a bell-shaped curve, with most results clustered around the middle and a much smaller group of outliers at the high and low ends. Knowing the average number of births in an area can help builders decide how many bedrooms are likely to be needed in new houses, and alert policy makers to a brewing fertility crisis. But averages can be misleading when a distribution is heavily skewed at one end, with a small number of unrepresentative outliers pulling the average in their direction.

What to make money from the “small number of unrepresentative outliers”?

Trend following is the answer.

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