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Days until the data take over
Strategies have true daily edges that are normal with variance . A single day of a strategy is its edge plus independent normal noise of variance . The posterior mean of an edge is a weighted average of the strategy's sample mean and the population mean. What is the smallest whole number of days for which the sample mean gets a weight of at least ? Give a whole number.
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Hint
The weight on the sample mean is .
Solution
- The weight is , which equals .
- Setting gives .
- So , and days are needed.
Answer: