Mean Reversion
April 26th, 2006 by 
independence
The philosopher Georges Santayana wrote: “Those who cannot remember the past are condemned to repeat it.” There is a corollary in the financial markets - those who do remember the past are condemned to frustration and underperformance in manias, like the bubble in which we find ourselves today.
Nassim Taleb’s book “Fooled By Randomness” describes this phenomenon, where the short-term success enjoyed by the novices fools them in to believing that they know what they are doing, when in fact they are so incompetent that they cannot recognize their own incompetence.
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