Question: (a) When using weekly observations on speculative prices, using the average of daily prices, one could invoke the central limit theorem to justify using the

(a) “When using weekly observations on speculative prices, using the average of daily prices, one could invoke the central limit theorem to justify using the Normal distribution for modeling such prices.” Explain the fallacy in this argument.

(b) In a fair coin-tossing experiment a gambler is betting on “heads (H).” At a certain point during the experiment the sequence of outcomes “TTT” has occurred and the gambler decides to put all his money on getting an “H” in the next toss by invoking Bernoulli’s law of large numbers. Explain the fallacy behind his strategy.

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