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Story Sharing - Chimpanzee Vs Fund Manager

Wednesday, December 4, 2013

There was a test conducted in the United States where they asked a blindfolded chimpanzee to pick some stocks by thorwing darts at the Wall Street Journal (newspaper). 

The performance of these stock later compared with that of some reputable fund managers.

The result?

Some of the fund managers couldn't even beat the chimp!

Moral of the story: This test was conducted in the United States to prove the theory of random walk, which is associated with efficient market hypotesis. The logic behind this is that any stock price is truly reflective of the information avaible in the market. Tomorrow's price change will be reflected by tomorrow's news and will be independent of the prices changes today. Hence, price changes are unpredictable and random.

However, as you gain more knowledge, you'll realize that our stock market is not fully efficient yet, Hard work does pay off well in the stock market.

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