
Begeman's _Manufacturing Processes_
talks about Quality Control Charts:> The tolerance limits for a part are placed outside of the control
> limits and are never inside of them.  Once the control chart has
> been established, data is recorded on it and it becomes a record
> of the variation of an inspected dimension over a period of time.
> The data plotted should fall in random fashion between the control
> lines, if all assignable causes for variation are absent.  When the
> data fall in this manner, it can be assumed that the part is being
> made correctly 99.73% of the time; that is, no more than 3 out of
> 1000 will leave the process incorrectly made.Taking a look at the S&P 500, and 
using the Ibbotson 2000 figures of
13% expected stock return and 20%
standard deviation, and taking the
the actual 2.5 year return on the
S&P since 31 Dec 1999 to be close
to -30%, we find:-.30 ? 2.5*(.13) - 3*sqrt(2.5)*(.20)
-30% > -60%so it still plots out between the
control lines ...> So long as the points fall between the control lines, no adjustments
> or changes in the process are necessary.  If five to seven points fall
> on one side of the mean, the process should be checked.  When points
> fall outside of the control lines, the cause must be located and
> corrected immediately.... but maybe we should've checked
the process during the "long" bull.-Davehttp://xent.com/mailman/listinfo/fork
