The odds of a two-sigma event (on the right hand tail of the normal distribution – as in a bubble) NOT being representative of a bubble condition (assuming that the calculations were done properly) is around 2.2%.
Almost. The odds of a +2 sigma event occurring is around 2.2 %, based on a Normal distribution.
The odds of a +2 sigma event NOT reverting to the mean (by Grantham’s measure) is 1/28 = or 3.6%.
(One is not quite enough samples, but you get my drift).
Anyway, I agree that the odds that we are NOT in a RE bubble that will revert to the mean in terms of rents, salaries and prices is small.
