Friday, March 5, 2010

Changing History

We change history all the time.  What we want to remember, what we choose to document and who we highlight in history automatically puts filters and biases on how history is described.  And the winners of wars are in the drivers seat in teaching history the way they see it.

History can be changed in the financial industry.  A sophisticated term  called "survivorship bias" allows the index to be changed historically. The S&P 500 Index (created in 1926 with only 90 companies) is composition of 500 stocks (since 1957) that changes yearly.  These changes are essentially - changing history by changing the current composition of stocks.  Simply said - don't let the failed stocks penalize our historical returns. 

Technology allows you to change or control history.  Just use the tools, options tab on your browser. 

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