Monkeys make better trades than the average fund manager?!

The official version of this paper will be published in the summer edition of the Journal of Portfolio Management.

You can haz pet monkey.

The problem here is that the article focuses on return without looking at risk.

Spoken like a true CFA-er!

The study is actually a real-life version of a study from from Rob Arnott, CFA and Dr. Jason Hsu Ph.D from Research Affiliates (creators of the RAFI indices) and their team. The study includes not only “Malkiel’s Monkey” from the famous book “A Random Walk Down Wall Street” as simulated by a randomizer that selects 30 random stocks from a Russell 1000 universe on an annual basis… But also a comparison of several smart beta strategies and the implications of rebalancing on size and value tilt over time, which led to greater return over the extended investment horizon (1964-2012 in the study). The interesting part is that for a given smart beta strategy, the INVERSE or that strategy ALSO provided higher returns (many times higher risk-adjusted return) than a market-cap weighted benchmark. I actually spoke with Dr. Hsu the week prior to my week off for CFA exams at the CFA Annual Meeting for the local chapter here. Very nice gentleman. I have soft copies (powerpoint and PDF) of both the analytics presentation of the study from Dr. Hsu, as well as the paper itself. If anyone’s interested.

Wasn’t there a famous economist that used a gorilla (unlike this article, LITERALLY used an ape) to pick stocks and beat the market?

Another case I remember was an economist that threw a whole bunch of paper slips from a balcony, and got his toddler daughter to grab them at random.

The problem here is that the article focuses on return without looking at risk.

Man, I wanted to find a pet monkey to outsource management of my tiny investments … :(|) :(|) :(|)