“A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”
-Burton Malkiel, Asset manager and author of A Random Walk Down Wall Street.
Who knew that Economist Burton Malkiel’s comment would be so prophetic!? Malkiel hypothesized that share prices move completely at random, making stock markets entirely unpredictable. While his statement about blindfolded monkeys and dartboards was a reference to the randomized nature of stocks and not a prescription for stock market success, it was only a matter of time before it was put to the test.
In 1988, the Wall Street Journal ran the first of many Dartboard stock picking contests. WSJ staffers acting as the monkeys, throwing darts at a stock table, while investment experts picked their own stocks. After six months, they compared the results of the two methods, along with stock picks from some of its readers.
The results? In the initial contest, the experts edged out the darts. However, as further “experiments” continued, the experts fared less well against darts thrown by people and, eventually, monkeys.
Money Managers or “Monkey” Managers?
In January 1999, a chimpanzee actress named Raven (the star of Babe, Pig in the City) threw 10 darts at a dartboard of 133 internet related companies. Within six trading days one of her picks was up a whopping 95%! By the year’s end, according to George Fisher, author of The Streetsmart Guide to Overlooked Stocks, Raven’s portfolio of ten randomly-selected stocks had outperformed more than 6,000 internet and technology money managers earning an astonishing 213% return.
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