Sunday, March 14, 2010

Doing the unthinkable

A Swedish newspaper gave $1,250 each to five stock analysts and a chimpanzee named Ola, to test who could make the most money on the market in a one-month period. Ola the chimp, who made his choice of purchases by throwing darts at the names of companies listed on the Stockholm exchange, won the competition.

A fluke? Maybe, maybe not.
-- For years, the Wall Street Journal did this every month, enlisting four Wall Street stock experts to pick one stock apiece, and then having someone throw darts four times at the paper's stock listings. After six months they'd compare the average returns on the four stocks the experts picked versus the four stocks the darts hit. Very often, the "dartboard portfolio" won; almost always it beat at least one or two of the pros' picks.

These kinds of studies are often conducted and reviewed by economists, too. Mishkin's textbook has a section on them, titled, "Should you hire an ape as your investment adviser?" Or maybe you don't need an investment adviser...

In another experiment, a four yeard old girl Tia Laverne beat an experienced analyst and a financial astrologer.

Now why don't the stock market books teach us this technique of investing? The closest the formal books have come to is passive investment strategies involving buying index funds.

After reading such scientific researches, I am having a thought of choosing stocks the chimp way to beat my fund manager...


  1. Very Interesting read. Suddenly fund managers are to be replaced with apes (or NO fund managers at all). It also signifies the concept of luck or in definite terms probability. I guess I am digressing from the topic.

  2. I am in the process of hiring one chimp for the job. You can apply too, Chimpoo... please make sure you can surely hit the dartboard at least. I will give preference to people who have a pet name with the word "Chimp" in it ;)

  3. Hell ya!!! Just wondering how people make things as such as barter to grow into as much as stocks and finally upto the chimps for out of the box analyses!!! Makes one wonder where the human civilization is going...