YOUR KILLER EQUITIES INTERVIEW QUESTIONS: You walk into the casino and head for the roulette table...

8 July 2011

2 minute read

YOUR KILLER EQUITIES INTERVIEW QUESTIONS: You walk into the casino and head for the roulette table...

Here's the latest question sent in by site visitors who have attended equities interviews at investment banks. This question is asked in trading interviews. The answer has been suggested by the person who submitted the question (and is not being advocated by us). If you disagree with the answer, or have any brilliant alternative responses, please express your opinion in the comments box below.

THE QUESTION: You walk into the casino and head for the roulette table. When you arrive, someone tells you that the last 5 numbers that have popped up on the roulette table are the number 18. What will your strategy at the roulette table be?

THE SUGGESTED ANSWER:

The cliched answer would be that it doesn't matter - the odds of any number being hit are equal on a roulette table.

The really foolish would say that we should not bet on 18 since it has already popped up 5 times so the odds of it popping up again are lower.

Both are WRONG or not ideal.

The ideal answer is: "I would be on 18 again."

Firstly because it doesn't make a difference since theoretically all numbers have equal odds. But PRACTICALLY, there might be something that just went wrong with the roulette table so you might as well bet on the side of bias just in case there is something wrong with it (and it's weighting it down towards 18!).

AUTHORSarah Butcher

Global Editor

12 comments

Ch
Chris
21 July 2011
Take the chips off the table, cash them in and give to Oxfam's latest appeal....Of course, you won't get the job...but you might get your life back.
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Al
AliDesai
11 July 2011
I am surprised people in equities can count up to 18
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Ra
RainMan
11 July 2011
If there is a defect with the table and it's weighted/slanted towards that part of the table; then yes you would bet on 18 BUT (if anyone knows roulette) you would also do neighbour bets for the numbers around 18 that it could also potentially land on.
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Pi
Pingu
11 July 2011
As a famous economist once said. If you find a $100 dollar bill note dropped on the floor. Chances are , it isn't there as someone else will have picked it up. All knowledge here is public knowledge. So yes from a numbers perspective, it doesn't matter.
However, since this is an equities interview, the answer 18 should suffice.
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Th
TheHouseAlwaysWins
11 July 2011
Assuming that the roulette wheel is fair the odds of 5 18s in a row are (1/35)&35=1/52521875, which I would say is a slight indication that there is something wrong with the wheel or the guy spinning it.
This means that our prior belief about the outcome is peaked at 18, and we should place our first bet there. As new numbers come in, the prior could be updated with Bayes rule. If we are wrong it will progressively flatten (and we have a fair wheel). If it does not and it remains peaked around 18 (not necessarily AT 18) then the wheel is not fair. Either way, Bayesian statistics provides a principled reason as to why 18 should be your first pick.
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