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Chapter 3. Performance Data > The Zero-Sum Nature of the Markets

The Zero-Sum Nature of the Markets

“Zero-sum” or “zero-sum trading” is arguably the most important concept in this chapter. Larry Harris, the Chair in Finance at the Marshall School of Business at University of Southern California and the current Chief Economist of The Securities and Exchange Commission, gets to the crux of the matter:

“Trading is a zero-sum game when gains and losses are measured relative to the market average. In a zero-sum game, someone can win only if somebody else loses.”[31]


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