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Investments glossary

Hot Hand

The ‘hot hand’ is the notion that because one has had a string of successes, an individual or entity is more likely to have continued success. For example, if one flipped a (fair) coin and guessed correctly that it would land on heads three times in a row, it might be said that they have a hot hand. Under such circumstances, a person believes that their odds of guessing which side the coin will land on next are greater than the 50% they actually are. When there is a series of failures, the same concept works as the ‘cold hand’.

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