1/21/2006 Add a comment

In the TradingMarkets.com / Playboy 2006 stock-picking contest, 4 of the 10 Playboy bunnies are currently in the top 1% of all equity mutual fund managers, beating over 11,700 people who do this for a living. And 9 of the 10 are beating the S&P 500.

But markets absorb information in a perfectly efficient way, right? So either this is random chance (and someone else can work out the odds that 40% of the non-pros would be in the top 1%), or the efficient markets hypothesis is nonsense.

Thanks for the link, John! ben

Comments

  1. Anonymous Dan: Two in a million. That's the probability of at least 4 bunnies ending up in the top 1% of investors, if all investors are independent and equally likely to have any given level of success. But is it reasonable to suppose that they are independent and identically distributed? Probably not. For starters, I would imagine that the typical bunny has a smaller and less diverse investment portfolio than most fund managers, which increases the variance, making them more likely to do extremely well or extremely poorly. Also, it's likely that the bunnies have similar investments to each other, which would mean that they aren't independent. This makes four extreme successes more likely, since they aren't really four separate unlikely events.

    Still, it's pretty remarkable. Have you thought about investing in Playboy?

    -Someone Else
    1/21/2006