Non-Ergodicity and its Implications for Businesses and Investors

Posted on by fundooprofessor

Here is the link to my talk at OctoberQuest 2019.

Thank you Ole Peters for his generosity. And my thanks to Nassim Taleb for being such a wonderful teacher. I used some of the key ideas from Peters and Taleb for this talk.

Link:

http://bit.ly/2MOWbfJ

Published by fundooprofessor

I am Distinguished Adjunct Professor at Flame University, Pune. Previosuly, I was Adjunct Professor at MDI, Gurgaon, where I taught MBA students two popular courses titled “Behavioral Finance & Business Valuation"(BFBV) and Forensic Accounting and Corporate Governance (FACG) for many years. I am also Managing Partner at ValueQuest Capital LLP— an investment advisory boutique which helps its clients invest their capital in good quality businesses.

7 thoughts on “Non-Ergodicity and its Implications for Businesses and Investors”

  1. An eye opener. Even for me who is already with a well diversified portfolio.

  2. Dear Prof. Bakshi, I am a huge fan of your work but wanted to ask that would you include Piramal Enterprises in the same list? I recall PEL being part of your portfolio at some point in time. Is that the primary reason behind its exclusion? Warm regards, Puneet

  3. Sir – How do we explain the success of investors who have achieved success by investing in few stocks only. For e.g Mohnish Pabrai – his most of the capital allocation is in very few stocks (<10). In fact at some point in time, it was only 3-4 stocks. Is it because of their exceptional skill or have they identified the worst possible outcome and then made the investments ? If we just consider skill that might not be appropriate as even the best investors might be wrong (e.g Buffet investment in Kraft Heinz). Mohnish himself claims that he might be wrong 1/3 of the time.

  6. Hello Prof Bakshi,

    the foundation of this presentation has (perspective) error which makes rest of the presentation incorrect.
    If I win 50% of wager amount and loss -40% with each bet. The expectancy is negative. Hence it is not an fair game.

    100*1.5=150 next bet 140*0.6 = 90

    The final balance after two trial is 90 which is 10 less than starting balance.

    1. I think you meant

      100*1.5=150 next bet 150*0.6 = 90

      Let’s change the odds. To, say, 80% upside and 40% downside.

      100*1.8=180 next bet 180*0.6 = 108.

      In this bet also, if you keep betting, you’ll eventually lose because all that will take for you to lose would be a long losing streak and the more you play the more the chance that you will get a few long losing streaks. You will only win if you do not bet the entire bankroll on each successive bet.

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