Is Wall Street A Casino? by Norman J. Brown
Do stocks have a random characteristic similar to a roulette wheel, and can we gain a winning edge by trading equities? Here, we simulate Wall Street stocks on an artiﬁcial roulette wheel to ﬁnd the answer.
In my August 2016 S&C article The Subtle Aspects Of Expectancy, I developed a larger winning level for roulette that retained the same in-house winning expectancy of 5.62% and indicated the resulting proﬁt/loss spread. Then this thought occurred to me: Why not use the same approach to simulate Wall Street stocks (equity type) on an artiﬁcial roulette wheel, with the required adjustments, and then study the output with Monte Carlo simulation?