A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

by Burton G. Malkiel

Subjects were then asked to rate the relative likelihood that eight different statements about Linda were true. Two of the statements on the list were “Linda is a bank teller” and “Linda is a bank teller and is active in the feminist movement.” Over 85 percent of subjects judged it more likely that Linda was both a bank teller and a feminist than that she was a bank teller. But this answer is a violation of a fundamental axiom of probability theory (the conjunction rule): the probability that somebody belongs to both category A and category B is less than or equal to the probability that she belongs to category A alone. Obviously, few respondents had learned much probability theory.