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Microsoft® Excel® for Stock and Option T... > Chapter 1. Introduction—The Value of...

Chapter 1. Introduction—The Value of Information

The Struggle for a Statistical Edge

The equities markets are a zero sum game in the sense that every dollar won must also be lost. This simple fact has far-reaching implications that are sometimes counterintuitive. For example, most investors do not realize that the investment community as a group cannot profit from the rise of a single stock unless the company pays a dividend. This limitation exists because all profit must emanate from buying and selling activity between the investors themselves. Although individual trades can certainly generate a positive return, there is a finite amount of money in the system and the source of that money is the individual investors. The markets are the ultimate expression of capitalism—someone always wins and someone else always loses.


  

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