This is actually an awesome illustration of why a lot of famous results in academic finance were wrong in the 70s and 80s. Returns don't average, they multiply.

This is actually an awesome illustration of why a lot of famous results in academic finance were wrong in the 70s and 80s. Returns don't average, they multiply. If you get HHTT or TTHH you're in terrible shape: 2.25 * .36 = .36 * 2.25 = .81 You started with $1 and now have 81 cents. I recently learned that a lot of early computer-era academic finance actually made the same error of averaging returns, as described in Finding Alpha: http://falkenblog.blogspot.com/2016/08/finding-alpha-pdf.html http://falkenblog.blogspot.com/2016/08/finding-alpha-pdf.htm...