From: Eliezer S. Yudkowsky (sentience@pobox.com)
Date: Sun Jun 15 2003 - 15:01:27 MDT
Rafal Smigrodzki wrote:
>>
>> Normal or Pareto?
>
> ### Why Pareto?
I vaguely remember hearing about a Pareto distribution. Possibly that was
for rich people in general, though, as opposed to stock-market traders.
The distribution of wealth among traders:
Should be normal, if everyone makes trades in constant amounts.
Should be log-normal, if everyone makes trades using a constant fraction
of their current wealth.
Should be Pareto, if market returns are dominated by occasional big wins
that occur at random. (Or if the general wealth of entrants follows a
Pareto distribution and the stock market doesn't change it much?)
I think that's how it'd work out.
-- Eliezer S. Yudkowsky http://singinst.org/ Research Fellow, Singularity Institute for Artificial Intelligence
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