Markets: A Rigorous Course

M04 · Problem 10 ★ Check

Survivorship

Using Proposition 4.9 with μ=15%\mu=15\%, σ=50%\sigma=50\% and removal after a fall of more than 60% in a year, compute the survival probability and the survivorship bias in the mean. Give two reasons why the true bias for a 10-year Indian small-cap breakout backtest is likely larger.

Answers

Commas, ₹, % and 1e-3 notation are accepted.

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