Misuse of percentages

Lone Wolf · 29 April 2013

sinner said:
It's obviously harder, because you have a lower starting capital to make back the same amount of money that you lost.

Exactly.

burglar said:
Somehow the implication is that - because the percentage is higher,
it is harder to get back to breakeven.

No. The implication is that turning $8000 into $10,000 is harder than turning $10,000 into $12,000. Percentage is just a way of tracking the change in capital without using specific $ amounts.

You're thinking people believe it's harder due to the % difference. That's not true. The % figure is simply a measurement tool. The reason it's harder is because you need to make the same return of a smaller capital base.

craft · 29 April 2013

sinner said:
It's obviously harder, because you have a lower starting capital to make back the same amount of money that you lost.

Why the assumption that exposure changes? The OP just shows one stock fluctuating?

Obviously galumay hasn’t made that assumption and neither did I. The argument seems moot because it is being warped by different assumptions.

Its just a mark up versus margin issue as far as I can see.

sinner · 29 April 2013

craft said:
Why the assumption that exposure changes? The OP just shows one stock fluctuating?

Obviously galumay hasn’t made that assumption and neither did I. The argument seems moot because it is being warped by different assumptions.

Its just a mark up versus margin issue as far as I can see.

Even in the case of 100% exposure to a single $100 priced asset, if the price of that asset goes to $0 over the course of 1 year, are we really saying the probability of the asset returning to $100 over the next year is equally likely? If the price of an asset goes from $100 to $200 over the course of 1 day, is it equally likely for the price of that asset to go to $100 on the day after?

We aren't talking about a plot of a sin wave, we are talking about timeseries representing the historical traded price of a financial asset with economic factors determining that price.

EDIT: Said $0 meant $100

galumay · 29 April 2013

craft said:
Why the assumption that exposure changes? The OP just shows one stock fluctuating?

Obviously galumay hasn’t made that assumption and neither did I. The argument seems moot because it is being warped by different assumptions.

Its just a mark up versus margin issue as far as I can see.

Exactly, people keep invoking conditions, context and assumptions that are simply not relevant to the initial point being made. It's pretty basic maths. Perhaps it is muddied by people trying to use analogies?

burglar · 29 April 2013

craft said:
Why the assumption that exposure changes? The OP just shows one stock fluctuating?

Obviously galumay hasn’t made that assumption and neither did I. The argument seems moot because it is being warped by different assumptions.

Its just a mark up versus margin issue as far as I can see.

My "one stock in a portfolio" example was chosen for clarity *gulp*
Clearly there could be 2181 ASX stocks, doesn't change what I am saying!!

It could be the DOW, the time frame could be over a century!
As in my second example!

It doesn't change what I am saying!!

Seed capital is what I put in.
Market Value is what I have left.

If I change the base of percentages from one value to another,
I can no longer compare the two.

Lone Wolf · 29 April 2013

craft said:
Why the assumption that exposure changes? The OP just shows one stock fluctuating?

I admit that I made an assumption in my response. My reason is that I thought the main point of the original post was this:

burglar said:
I don't know why I keep seeing this !!

If you lose 20% of your capital, you need a 25% increase to get back to where you started.

The context that I usually see this stated is where you lose the money and it's not coming back. ie. Stoploss being hit, or a company suffering a serious unrecoverable setback. I'm not sure I've ever heard anyone use it in such a specific, tight range example such as the posted chart. I actually thought the chart posted was out of context and irrelevant to statement being questioned. So I responded according to what I thought people saying this really meant.

But experiences vary and Burglar may have seen it often used in the context he described. So I was wrong to assume he was using it out of context.

Maybe that's the simple answer to why he keeps seeing it. It's often used by people like me who use it in a different context to him.

Julia · 29 April 2013

sinner said:
It's obviously harder, because you have a lower starting capital to make back the same amount of money that you lost.

Such a simple, obvious point which seems to be lost amongst the spurious arguments to the contrary.

craft · 29 April 2013

sinner said:
Even in the case of 100% exposure to a single $100 priced asset, if the price of that asset goes to $0 over the course of 1 year, are we really saying the probability of the asset returning to $100 over the next year is equally likely? If the price of an asset goes from $100 to $200 over the course of 1 day, is it equally likely for the price of that asset to go to $100 on the day after?

No. Changing the extent of the argument to the extremes you suggest and I would assume an underlying change in value hence real exposure.

As I feel I'm going in circles trying to respond to varying assumptions and really don't follow what the OP is saying anymore, I'm going to tuck my tail between my legs and leave this thread to others.

galumay said:
Exactly, people keep invoking conditions, context and assumptions that are simply not relevant to the initial point being made. It's pretty basic maths. Perhaps it is muddied by people trying to use analogies?

+1

burglar · 29 April 2013

craft said:
... I'm going to tuck my tail between my legs and leave this thread to others. ...

Me too.

I have a headache from trying to explain why,
if I lose $2K, I need to regain $2K to breakeven!!

galumay · 30 April 2013

burglar said:
Me too.

I have a headache from trying to explain why,
if I lose $2K, I need to regain $2K to breakeven!!

Me three.

burglar · 30 April 2013

My ADN Adelaide Resources shares rose 187% in the first hour of trade.

This percentage is based on yesterday's Last Price.

I did not buy them yesterday at this price.
The percentage (whilst valid) is useless to me.

This is my calculation of "Return on Seed Capital":
($0.135/$0.265-1)*100=-49.06%

burglar · 30 April 2013

Julia said:
Such a simple, obvious point which seems to be lost amongst the spurious arguments to the contrary.

Spurious??!
Why don't you just say I am wrong.

Are you afraid that
A.)You may have misunderstood.
...or ...
B.) You are wrong!

Spurious??!
Curious word choice.

prawn_86 · 30 April 2013

burglar said:
Me too.

I have a headache from trying to explain why,
if I lose $2K, I need to regain $2K to breakeven!!

So is it easier to make 2k when you have 8k or when you have 100k?

FlyingFox · 30 April 2013

prawn_86 said:
So is it easier to make 2k when you have 8k or when you have 100k?

It's a lost cause prawn ...

white_goodman · 30 April 2013

burglar said:
Me too.

I have a headache from trying to explain why,
if I lose $2K, I need to regain $2K to breakeven!!

well done, if i drop a dollar on the ground, I have to pick up that dollar to get it back.. prophetic isnt it...

you dont seem to be aware of basic probability or risk, how quaint

Ves · 30 April 2013

white_goodman said:
you dont seem to be aware of basic probability or risk, how quaint

I would disagree that the probability of the value of the cashflow stream generated over a long timeframe has any relation to the short-term fluctuations of its market price.

If something goes from $1 to $0.80 in the short-term the probability of the value of its future cash flow does not change (unless of course the price drop is in relation to an actual event distinct from the share market).

This argument has not been resolved because no one has stated any definition or context. It's just a willy nilly mish mash of different philosophies.

It is however, not full of spurious arguments, I think that comment was just plain rude.

white_goodman · 30 April 2013

Ves said:
I think that comment was just plain rude.

that was clearly the intention

burglar · 30 April 2013

Ves said:
I would disagree that the probability of the value of the cashflow stream generated over a long timeframe has any relation to the short-term fluctuations of its market price.

If something goes from $1 to $0.80 in the short-term the probability of the value of its future cash flow does not change (unless of course the price drop is in relation to an actual event distinct from the share market).

This argument has not been resolved because no one has stated any definition or context. It's just a willy nilly mish mash of different philosophies.

It is however, not full of spurious arguments, I think that comment was just plain rude.

+ 1.0

Ves · 30 April 2013

white_goodman said:
that was clearly the intention

Not referring to your comment, W_G.

waimate01 · 30 April 2013

burglar said:
I have a headache from trying to explain why,
if I lose $2K, I need to regain $2K to breakeven!!

Sure, sure. And if you started with $2k, and lost $2k, you'd have to be particularly wiley about how you deploy your remaining $0 to make that $2k you need to break even.

This isn't a question of philosophy; I'm afraid it's a question of numeracy. Sorry if that offends.

Misuse of percentages

Lone Wolf

craft

sinner

galumay

learner

burglar

Lone Wolf

Julia

In Memoriam

craft

burglar

galumay

learner

burglar

burglar

prawn_86

Mod: Call me Dendrobranchiata

FlyingFox

white_goodman

BOC

Ves

Beyond Good and Evil

white_goodman

BOC

burglar

Ves

Beyond Good and Evil

waimate01

Similar threads

Misuse of percentages

learner

In Memoriam

learner

Mod: Call me Dendrobranchiata

BOC

Beyond Good and Evil

BOC

Beyond Good and Evil

Similar threads

Privacy & Transparency

Privacy & Transparency