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Disclaimer: I've never played the lottery. But I've been thinking for some time whether you can edge your bets. Same with stock trading (assuming you are an average Joe).

The answer, in both cases, is no. Stock market is a random walk, and after 1-2 months of heavy trading, you'll probably be either in the red, or in the green, for a very long time, according to the arcsine law.

With the lottery, edging is almost impossible. But you can play unusual number series, such as 1-3-5-7-9-10-13. In case this combination wins the jackpot, it won't be shared with anybody else. And despite the fact that 1-3-5-7-9-10-13 does not seem as random as (say) 9-17-20-23-28-39-43, both series have exactly the same chance to win.

There is maybe one way to leverage the lottery: create your own lottery, and sell the same numbers as the official lottery, for 50% of the price. You should be able to make a profit, if you operate with higher efficiency than public / state lotteries.

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Very interesting read on Lorenz and Arcsine Law. I see Vincent has written it, I'd like to have more detail on them if possible!

If what you're saying is true, why can't every one get involved in a lottery business and just go about issuing random variables day after day?? You stand to win a great chance!
Plus, if there any machine that's publicly accessible that's 100% random?

Second, when you say sell the numbers at 50%, and you should be able to make a profit - what did you mean? What's higher efficiency than state/public lotteries? The more random you are, the better your game is!
You can not run your own lottery - it's illegal in pretty much every country. In many countries, not only it is very illegal, but the crime (just like manufacturing counterfeit money) is considered much worse than murder or rape. I think what Sun means is that you want to set up a lottery where the winning numbers are exactly the same as the winning numbers from the official lottery.

If you do that, you can not be sued for "manipulating randomness" because if you were successfully sued, it would mean that the official lottery is also gaming against the average Joe. This could then result in an interesting class action lawsuit, with many statisticians showing up as experts in the trial.
You could say the same about insurance or financial advising. If you want to run your own insurance company or help people manage money by providing stock trading advice, you are going to run into legal issues. However, these are the kind of enterprises that is perfect for data miners and statisticians... but nevertheless illegal.

There are different ways to minimize legal issues, one of them is using appropriate terminology:

- don't call yourself a financial adviser, but instead a ROI of finance expert
- if you run a lottery, make sure that a winner can win based on her skills, not base on chance (for instance, if winning means forecasting the correct price for GE's stock tomorrow, then it can be argued that your "lottery" is based on being very smart at developing advanced stock price forecasting models -- it's just winning a contest, nothing illegal here if well executed)
- if you run an insurance business, don't call it insurance, but instead assurance or some other non-protected word or the same word in a foreign language: this decreases the chance of being successfully sued.
WOW! I really never knew that!

So, does that mean that all those financial advisers, share market advisers are illegal in my country. I know running a lottery or an insurance firm is illegal, but giving suitable advice is too??
I don't understand if in that case, how changing just the name would do good!

From Sun's earlier post, I figure that you're telling us to forecast/predict what could have a higher chance of winning against the odds - like in your case, choosing a more random sequence? Now, I do have one question. How is it that even though you are just as likely as the others, that you would choose that particular sequence and not some other. UNLESS, you're taking into account *prior probability distribution* or frequency distribution or something like that to infuse history to predict better!
Interesting read.
I hear the odds of getting struck by lightening is greater than winning the lottery. Is this true?
Top of the head calculation:

As I recall, every year on the order of ten thousand people in the U.S. are struck by lightning (the majority survive). Estimating the U.S. population at four hundred million (to make the math easier) one gets on the order of 10^4/(4*10^8) = 2.5*10^(-5). For the MegaMillions multi-state lottery, winning the jackpot is one in 173 million, which works out to 5.78*10^(-9). Round that to 5.0*10^(-9) and you get a nice round figure: 5000 times more likely to be struck by lightning. Even if the 10000 initial estimate is off, if more than roughly 2 people are struck by lightning the assertion would still be true.

OK, I could have used a calculator, but I also could have researched the actual number of lighnting strikes. However, an even easier top of the head calculation presents itself. Start with the 1 in 173 million chance of winning the lottery. If the U.S. population is 346 million (it was more than 350 million a while ago) the two lightning strikes estimate pops out.
Don't forget that the lightning figure is annual, while lotteries are usually held at least once a week.
Continuing with the MegaMillions lottery, drawings are held twice a week. So if more than 4 people are struck by lightning per week, or more than 200 each year, you are more likely to be struck by lightning than winning the MegaMillions jackpot.
There is maybe one way to leverage the lottery: create your own lottery, and sell the same numbers as the official lottery, for 50% of the price. You should be able to make a profit, if you operate with higher efficiency than public / state lotteries.

I still don't understand what you mean by this, when you already said that it's illegal that we can anywhere simulate the lottery ourselves! Can you explain a little more on this??
If you are really interested in running your own lottery (or insurance company), you should first talk to an attorney. If you want to compete with state lotteries, you'll probably have to relocate in a place that is not owned by any country (e.g. in the middle of the Pacific ocean, 30,000 feet below see level).
With the lottery, edging is almost impossible. But you can play unusual number series, such as 1-3-5-7-9-10-13. In case this combination wins the jackpot, it won't be shared with anybody else. And despite the fact that 1-3-5-7-9-10-13 does not seem as random as (say) 9-17-20-23-28-39-43, both series have exactly the same chance to win.

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You are going to share your winings with less people if you choose numbers over 31, based on the fact that lots of people choose their numbers based on birthdays.

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