[extropy-chat] Peak Oil meta-news
pharos at gmail.com
Wed Mar 8 23:47:59 UTC 2006
On 3/8/06, Eliezer S. Yudkowsky wrote:
> BillK wrote:
> > On October 7, 1998 the Journal presented the results of the 100th
> > dartboard contest. So who won the most contests and by how much? The
> > pros won 61 of the 100 contests versus the darts. That's better than
> > the 50% that would be expected in an efficient market. On the other
> > hand, the pros losing 39% of the time to a bunch of darts certainly
> > could be viewed as somewhat of an embarrassment for the pros.
> > Additionally, the performance of the pros versus the Dow Jones
> > Industrial Average was less impressive. The pros barely edged the DJIA
> > by a margin of 51 to 49 contests. In other words, simply investing
> > passively in the Dow, an investor would have beaten the picks of the
> > pros in roughly half the contests (that is, without even considering
> > transactions costs or taxes for taxable investors).
> This information is completely useless unless we know by how much the
> pros won or the monkeys lost. The pros might do very poorly winning 61
> out of 100 contests, if they won small and lost big. Conversely the
> pros might have done much better relative to the Dow than "51 out of 49"
> would tell you, if they won big and lost small.
True. And there are much more subtle effects as well. Like the pro's
chose 'riskier' stocks and publicised their choices, which might have
encouraged people to buy these stocks and push the price up.
Read the page referenced for more details.
There has been much academic analysis of these results. After all,
these 'experts' have to try to justify their fees.
Professor Bing Liang concluded that the pros neither outperformed the
market nor the darts. According to Liang, the pros supposed superior
performance could be explained by the small sample size, the
announcement effect, and the missing dividend yields. One of the
strongest criticisms of the contest is the fact that the Journal
measures performance by price appreciation only, despite the fact that
total return is measured by both price appreciation and dividends. For
the period that Liang studied, the pro's stocks had an average
dividend yield of 1.2% versus yields for the darts of 2.3% and 3.1%
for the DJIA average.
Just buy a 'tracker' mutual fund. You'll do as good as the pros and
you can bank all the fees you would have paid them.
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