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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: knighttof3   😊 😞
Number: of 15062 
Subject: Re: Ot scaling back stocks
Date: 01/09/2025 8:18 AM
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if the price pops up 10% the prospective return goes down, so a move to own 10% fewer shares isn't entirely illogical. ...
This equates to a strategy of a constant dollar allocation unless/until there is a change in estimated IV. i.e., the number of dollars of market value you keep in a given asset rise no faster than the value per unit of that asset.

This is gambler's fallacy.

Let's say the base assumption is that stock price = IV + a random number between -100% and +1 million % (not uniformly distributed) of price.
Short term, IV stays the same, price pops up by a random number. Why should it go back to IV? Slot machines have no memory.
Never mind that ANY price movement is a combination of actual change on IV (which can be sudden due to new information) amd a random walk.
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