Simpson's Paradox
Also called: Simpsons paradox, aggregation paradox
Simpson's paradox is when a trend that appears in every subgroup reverses when the groups are combined. A fund family can have a manager beating the benchmark in every year and lagging over the full period, if the underperforming years carried far more assets. The resolution is always a lurking variable driving both group membership and outcome, which makes it a vivid argument for disaggregating data before believing it.
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