Re: Predicting the Stock Market Is Child's Play

Date: Fri Mar 15 2002 - 01:30:05 GMT

  • Next message: Wade T.Smith: "Re: Predicting the Stock Market Is Child's Play"

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    Date: Thu, 14 Mar 2002 20:30:05 EST
    Subject: Re: Predicting the Stock Market Is Child's Play
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    In a message dated 3/14/2002 5:08:40 PM Central Standard Time, Wade T.Smith
    <> writes:

    > Predicting the Stock Market Is Child's Play
    > rs.html
    > March 14, 2002 11:24 am EST
    > LONDON (Reuters) - A five-year old girl has beaten a financial analyst
    > and an astrologer in an experiment to find the most accurate stock market
    > predictions over a year, organizers said on Thursday.
    > Tia Lavern Roberts not only outperformed her fellow participants in the
    > National Science Week challenge but defied a 16 percent drop in Britain's
    > FTSE 100 index of leading shares with her selection of issues.
    > Her fantasy $7,000 portfolio rose 5.8 percent, while the one selected by
    > analyst Mark Goodson lost 46.2 percent over the year. Astrologer
    > Christeen Skinner's portfolio dropped 6.2 percent.
    > Goodson used his years of expertise and computer analysis, and Skinner
    > based her selection on planetary movements.
    > "During an unstable year for the stock market...Tia's random selection
    > has still managed to outperformed the others," Richard Wiseman, a
    > psychologist from the University of Hertfordshire who devised the
    > experiment, said in statement.
    > Tia thought it was "wicked" that she'd beaten the market, the statement
    > said.
    > Her tips for this year's investors were Cadbury Schweppes, Northern Rock,
    > Prudential, Pearson and Shell Transport.

    Thanks for sending this, Wade.

    There have actually been a number of similar experiments performed, such as
    one involving a chimpanzee who picked the stocks. My own hypothesis regarding
    such reports is this: any time someone performs one of these experiments and
    finds that the ape, the child, the dog, etc. picked a losing or mediocre
    portfolio, the story is uninteresting or even boring. The investigators may
    not bother to report it, and if they did, the media would not consider it
    newsworthy enough to report. Indeed, people who run web sites or who post to
    newsgroups might not find the stories interesting enough to report. But on
    those occasions when the child, the ape, or the dog out-performs the overall
    market, then there is a vivid, gripping story. People spend more time
    thinking about it and pondering the implications. But spending more time
    thinking about it can increase the average number of times they retransmit
    the story. Expecting others to find the story vivid, interesting, and worthy
    of (rewarding) attention can also lead people to repeat and retransmit the
    story more times. It is even possible that investigators have run their
    experiments multiple times and only reported the outcomes that made great
    stories, such as when the child, ape, or dog picked the most lucrative
    portfolios. (That, however, is not an allegation against the current
    investigators. I have not even read their report.) It is also possible that
    the very same investigators have reported a number of "boring" results as
    well as the provocative result, but that the media and others only
    retransmitted the provocative stories. The stock market seems to generate all
    sorts of propagating beliefs in addition to the ones mentioned in those stock
    market articles at

    But what am I saying? Perhaps I should just establish the Immaturity Growth
    Fund, a mutual fund whose stocks are all picked by a 5 year old. I could say
    "Outperformed FTSE 100 for 1 year, 5 years, and the life of the fund." Anyone
    want to invest? ;-)

    --Aaron Lynch

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