Stuart_Armstrong comments on The Ellsberg paradox and money pumps - Less Wrong

10 Post author: fool 28 January 2012 05:34PM

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Comment author: Stuart_Armstrong 09 February 2012 11:49:06AM 0 points [-]

The ratio of risk to return goes down with many independent draws (variances add, but standard deviations don't). It's one of the reasons investors are keen to diversify over uncorrelated investments (though again, risk-avoidance is enough to explain that behaviour in Bayesian framework).