reversion to the mean

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In a sequence of independent observations of a random variable, the greater the deviation from its mean of an observation, the greater the probability that the next observation will be closer to the mean. This appears to be counter-intuitive to the principle of independence, but it is actually a direct consequence of it, since probability measure is strictly increasing over an increasing interval. So, as you move away from the mean you necessarily increase the proportion of the distribution lying closer to the mean.

Subjects: Mathematics — Economics.

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