Thursday, February 01, 2007

An approach to randomness testing

One of the classical problems of statistical theory is to test a sequence for randomness. A core part of this problem is deciding what might be the alternative.

If this sequence is not random, then what kind of pattern might it have?

The choice of this alternative hypothesis will determine the important properties of the test. Some of the common alternatives are:

  • Serial correlation
  • Trends
  • Seasonality
My addiction to Yahoo's Video Poker has lead me to consider an alternative that the sequence is strategic, that is, some person is managing the sequence purposively, ie. in order to achieve some goal (of which I am unaware). This seems a lot more vague than the kinds of alternatives cited above. I have convinced myself that for both empirical and theoretical reasons, it is unlikely that the Video Poker sequence is generated by a (pseudo)random process. Empirically, one wins too often. Theoretically, a game with low payoffs would be less interesting than one "seeded with winning hands".

I am trying to analyze just how to approach this problem.

  1. What would be evidence that the sequence is strategic?
  2. What would be evidence that I have detected the manager's purpose.

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