Question of the Day

Behavioral Finance #17

A fair coin flipped 5 times results in Heads each time.

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What's the probability of the next flip being Tails?

Question of the Day

Behavioral Finance #17

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Exactly...50%

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Follow Up Questions

1. Why do you think that most people would expect the next coin flip to be Tails?
2. This phenomenon applies to other casino games, such as the Roulette Wheel (after 6 Reds in a row, the next one must be Black) and games involving dice. Does the Gambler's Fallacy hurt or help casinos?
3. When looking at a company’s stock price that has been rising for the past 2-3 years, do you immediately think…
1. This can’t last and it will likely fall OR
2. The price should keep going up?

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