Saturday, March 07, 2009

Rational expectations

Chris Dillow shows that idiot fund managers can, with not all that much luck, make a market-beating profit for several years at a stretch.

Given the large number of idiots, even a small success rate by chance means that we can expect a fair number of idiots to be hailed as financial geniuses, having delivered impressive results. Then their luck is likely to run out.

But that couldn’t really happen, could it?

1 comment:

Eunoia said...

Tom,
you might like to read "The Black Swan" and then consider the question again :-)