Will last year's star fund repeat?
Asked at DE Shaw, Jane Street
A fund posted a year standard deviations above its peer average. Year-over-year performance (in standardized units) is bivariate normal with correlation .
What is the probability the fund again beats standard deviation next year? (Use the standard normal: .)
Show a hint
You need the full conditional distribution of next year's performance, not just its mean. For standardized bivariate normal, .