Comment on “Historical stock data” by Daniel Stutzbach
You're right that this is a sampling problem.
Another way of phrasing my question is this: how many stocks do I need to sample in order to get the error rate satisfactorily low?
I suppose another way I could tackle the problem would be to study the distribution of changes in value of the S&P 500 stocks.
Here's a plot I just made of the percentage change in the S&P stocks from a year ago today, along with fits to normal and logistic distributions:
That's close enough to a normal distribution for me. Standard deviation is around 20 percentage points, so the average of 10 stocks should have a standard deviation of 20/sqrt(10) = 6.3 percentage points.
