Can monkeys help your investment?

Quote "This article mainly focuses on the debate on monkey's investment ability and its anecdotes. I've sent it to my friends in finance department but no reply, and to 52brain.com neuroeconomics forum also no rely. What's wrong? The research made by psychologist is interesting and it may cover such topics like the book "Nudge" & behavioral portfolio (company) by famous decision making research scientist Thaler. Huge gap, huh?"

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In "Quirkology", prof. Richard Wiseman mentioned two famous/infamous psychological experiment about monkey like portfolio on stocks. In both two experiments, one invested by a little girl via picking up scraps of paper and another by a champzine called Aula(in Chinese edition, "奥拉") via dart throwing, so called random selections beat financial professionals.

I was surprised at that time. How could this happen? As I know, financial professionals use logical/statistical mathematical tools analyse the stock information and gain market insights. Among them, Black-Scholes Option Pricing model may be the most widely used one. And this field is not magic but has a formal academic name called "Econophysics"(see this book in Chinese). In this industry, Renaissance hedge fund may be the most famous company based on such models and gain great market success as well. Most of its employees are mathematical graduates from top US universities(however they lack Wall Street working background, and Wall Street is the famous place where top financial companies locate). They call themselves "Quants"(in Chinese 宽客）(see this book in Chinese).

Based on these facts, I think it isn't possible for them (those who use rigid mathematical models like Renaissance, not those in Wall Street) to lose. As for those in Wall street, indeed, Wall Street Journal established a contest between random selection of stocks and those financial professionals from 1988 to 2002. It is to respond prof. Burton Malkiel's "A Random Walk Down Wall Street". The contest ended without delaration of any winner. More details can be found here and here. The 14 contest's outcome seems interesting (the graph can be found here).

Though professionals beat the "monkeys" (dart selection), the percentages they outperform over them aren't larger enough.

I hope these words will help readers and myself as well:). For more info, pls google for keywords
"飞镖选股法", "darts portfolio" and "monkey business".

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Term explanation

- In English, monkey business originally means fraud business like Bernard Madoff but here it is really made by monkeys or random dart throwing.