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Monkeys Are Better Stockpickers Than You'd Think: Dart-throwing primates demolish S&P 500 returns
Barron's ^ | 06/20/2014 | By JACK HOUGH

Posted on 06/20/2014 6:46:43 AM PDT by SeekAndFind

"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 famously argued in his classic 1973 book, A Random Walk Down Wall Street.

Malkiel may have given too little credit to monkeys.

Start with the record: U.S. large-company mutual funds have routinely failed to beat the Standard & Poor's 500 index since S&P began keeping score in 2002. Over the past five years, for example, 73% of active funds have fallen short of that benchmark. Today's fund families may appear well-stocked with winning funds, but that's in part because 26% of U.S. stock funds were merged or closed during the past five years.

Now consider that the S&P 500 isn't a good proxy for the stock-picking prowess of monkeys. Most of them, given enough darts, would have clobbered the index in recent years. That's because the S&P 500 weights companies by market capitalization, or the cost to buy all of their shares. Large companies have the most sway in determining returns. Monkeys don't care for cap-weighting; they prefer to equal-weight companies as their darts find their mark.

A March study by London's Cass Business School found that among 10 million randomly created indexes, each with 1,000 U.S. stocks in equal weights (that is, monkey portfolios), nearly all of them beat a cap-weighted index from 1968 through 2011.

In a recent report, Tim Edwards and Craig Lazzara at S&P Dow Jones Indices point out that the S&P 500 Equal Weight index has returned 9.1% a year over the past 15 years, beating the S&P 500 cap-weighted index by a whopping 4.6 percentage points a year.

(Excerpt) Read more at online.barrons.com ...


TOPICS: Business/Economy; Society; Weird Stuff
KEYWORDS: monkeys; monkeysstockmarket; sp500; stockmarket

1 posted on 06/20/2014 6:46:43 AM PDT by SeekAndFind
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To: SeekAndFind

Now, if you can get enough of them together with typewriters.....


2 posted on 06/20/2014 6:50:00 AM PDT by Right Brother
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To: SeekAndFind

I think the first version of this story I read was 1968.

I’m sure a guy reading that same story at that time was thinking.....

the first version of this story I read was 1918.


3 posted on 06/20/2014 6:50:33 AM PDT by DManA
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To: SeekAndFind

I realized this after employing an investment advisor for a year. All that SOB was focused on was accruing transaction fees.


4 posted on 06/20/2014 6:54:20 AM PDT by skeeter
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To: SeekAndFind

5 posted on 06/20/2014 6:59:00 AM PDT by Gay State Conservative (Rat Party Policy:Lie,Deny,Refuse To Comply)
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To: SeekAndFind

They should have their own investment firm and blog, Koko, Bubbles and Curious George LCC. I would be interested in next week’s stock pics.


6 posted on 06/20/2014 7:02:19 AM PDT by lormand (Inside every liberal is a dung slinging monkey)
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To: Gay State Conservative

Smartest guys on Wall Street!


7 posted on 06/20/2014 7:02:43 AM PDT by upchuck (... honesty is the never-ending rehearsal for those who want to be the friends of God...)
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To: upchuck
Smartest guys on Wall Street!

And in DC as well.

8 posted on 06/20/2014 7:04:57 AM PDT by Gay State Conservative (Rat Party Policy:Lie,Deny,Refuse To Comply)
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To: SeekAndFind

This has been true forever. I remember being at a party 35 years ago when some brokers there agreed that was the case.


9 posted on 06/20/2014 7:09:57 AM PDT by MNnice
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To: SeekAndFind
American Funds
10 posted on 06/20/2014 7:19:28 AM PDT by pgyanke (Republicans get in trouble when not living up to their principles. Democrats... when they do.)
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To: SeekAndFind

"Trust me, would I pick stocks by flinging poo?"

11 posted on 06/20/2014 7:32:23 AM PDT by Jonah Hex ("To Serve Manatee" is a cookbook!)
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To: MNnice

Back in the mid 90s I took a business class taught by a great conservative self made very successful guy. He mentioned the monkeys and stock picking story a few times.


12 posted on 06/20/2014 7:41:29 AM PDT by wally_bert (There are no winners in a game of losers. I'm Tommy Joyce, welcome to the Oriental Lounge.q)
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To: SeekAndFind

If you want to be in this market: RSP beats SPY over all 10 year timeframes. It’s the only advantage the little guy has.


13 posted on 06/20/2014 8:31:20 AM PDT by cicero2k
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To: SeekAndFind

They also make better Federal Reserve chairmen.

14 posted on 06/20/2014 8:38:08 AM PDT by Moonman62 (The US has become a government with a country, rather than a country with a government.)
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To: SeekAndFind

Does the monkey have a newsletter?


15 posted on 06/20/2014 10:03:25 AM PDT by Mr. Blond
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