This year, we witnessed a raging bull equity market.
Let’s call the raging bull market the "Null Hypothesis of 2013" for investors.
All year long, nearly 12 months now, I have listened to a lot of bull ---- from editors and readers alike who did not and will not accept that hypothesis.
The end of the year is firmly in sight. With tongue firmly in cheek, I ask you to return to your high school or college statistics class to disgorge these definitions.
- A type I error (or error of the first kind) occurs when one rejects the null hypothesis when it is true. It is a false positive.
- A type II error (or error of the second kind) occurs when one rejects the alternative hypothesis (fails to reject the null hypothesis) when the alternative hypothesis is true.
If you started this year bearish; or maintained a bearish stance during the year; or even if you were just modestly, technically bullish all year; you committed an error of the first kind.
You rejected the null hypothesis of a raging bull market in favor of the alternative hypothesis of a bear market or something else.
My RTI Question today: Fess up in public! Did you commit an error in thought on this market? Let us know which type of error it was, and what you learned from it.
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