Question

You are walking down Wall Street at 12 PM on a Thursday in New York City passing the New York Stock Exchange and you see someone dressed like a floor trader smoking a cigarette by the employee entrance to the exchange. “Excuse me,” said the person, “my luck has not been good today and I need to rebuild my confidence.” The person continued, “The return for the stock I’m tracking is normally distributed, and I just made a big bet that the return will exceed three standard deviations from the mean by closing today.” He asks you, “Is this a good bet?” Right away you say, “Yes, is a reasonable bet.” Your response was correct. (T/F)

Answer 1

Please don't hesitate to give a "thumbs up" in case you're satisfied with the answer

The response is not correct.

The definition of a good bet is a bet which is considered a usual event.

Any event beyond 2 deviations away from mean is an unusual event

Since this event' return probability exceeds 3 standard deviations, its an extremely unusual event, hence the big bet may go easily wrong as odds are very much against the bet.

Hence, Your response was correct. (T/F) - FALSE