There have been various demonstrations of random processes beating professional stock market analysts. Here’s the latest as reported by 3 News:
Cat beats investment professionals in portfolio challenge
A common domestic cat has outperformed two teams of humans, including a group of investment professionals, in a year-long stock market challenge. …
The professional team – comprised of Justin Urquhart Stewart of wealth managers Seven Investment Management, Paul Kavanagh of stockbrokers Killick & Co, and Schroders fund manager Andy Brough – presumably used their decades of investment experience to decide where to put their money. Initially the value of that experience seemed to be showing, with the professionals claiming the most profit by the end of September
But Orlando [the cat] was meanwhile making his stock picks by throwing his toy mouse every three months at a randomly numbered grid, where each number was allocated to a particular stock. And by the end of the year, it was Orlando’s approach that had paid off.
The cat finished the year with £5,542 (NZ$10,688). The professionals were in second place, with a total of £5,176 (NZ$9,982), while the school students had lost some of their starting capital to end the year with £4,840 (NZ$9,334).
This can be read at many levels. As a “human interest” funny with lots of bad puns (the approach taken by The Guardian). As an exposure of the empty hype of “financial experts” and the blatantly ludicrous renumeration packages that they insist that they deserve. Or perhaps most worryingly, as evidence of the madness of the markets. We are all at the mercy of a financial system that we don’t and probably can’t understand.
However the experienced investors did concede from the outset that not being a human could have some advantages. Mr Stewart told the paper Orlando would have no awareness of financial risk. “He doesn’t appreciate the need for a balanced portfolio and could end up choosing shares which really take off this year,” he said.
Shouldn’t we sack all the stockbrokers and turn the process over to random number generators? I know, better idea, why don’t we come up with an alternative to this mad, speculative system which exists to facilitate value extraction, and replace it with something that supports value creation instead?…