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Professional Analysis

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10 replies to this topic

#1
bull

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    In 1988 the Wall Street Journal began a contest that was inspired by Burton Malkielís book A Random Walk Down Wall Street. In the book, the Princeton Professor theorized that "a blindfolded monkey throwing darts at a newspaperís financial pages could select a portfolio that would do just as well as one carefully selected by experts."

    The Journal set out to create an entertaining contest to test Malkiel's theory and give its readers some new investment ideas in the process. Wall Street Journal staff members typically play the role of the monkeys (the Journal listed liability insurance as one reason for not going all the way and actually using live monkeys).

    The contest has become a popular feature for the Journal and has also drawn much interest and commentary from journalists, investors, and academics. Several academic papers have been written about the contest and its implications (summaries and links are included below).

    The contest began on October 4, 1988 and since then more than 100 contests have been completed under the current rules. Initially the contest lasted one month, but recognizing that the publication of the contest was creating a publicity effect on the proís stock picks, the Journal began measuring the results over a six month period beginning in 1990.

    The rules have changed at various times during the contest, but the current rules are as follows. Each month four "professionals" are given the opportunity to select one stock (long or short) for the following six months. The stocks must meet the following criteria.

    Market capitalization must be at least $50 million.
    Daily trading volume must be at least $100,000.
    Price must be at least $2.
    Stocks must be listed on the NYSE, AMEX, or NASDAQ and any foreign stocks must have an ADR.

    The pro's stock picks compete against four stocks usually chosen by Journal staffers flinging darts at the Wall Street Journal stock tables, which are pasted to a board. At the end of six months, the price appreciation for the proís stocks and the dartboard stocks are compared (dividends are not included). The two best performing pros are invited back for the next contest and two new professionals are added. In the latest twist to the contest, the Journal has begun taking stock picks from Journal readers which will also be compared with the pro's and dart's picks (see 4/8/99 article $$).

    On October 7, 1998 the Journal presented the results of the 100th dartboard contest. So who won the most contests and by how much? The pros won 61 of the 100 contests versus the darts. Thatís better than the 50% that would be expected in an efficient market. On the other hand, the pros losing 39% of the time to a bunch of darts certainly could be viewed as somewhat of an embarrassment for the pros. Additionally, the performance of the pros versus the Dow Jones Industrial Average was less impressive. The pros barely edged the DJIA by a margin of 51 to 49 contests. In other words, simply investing passively in the Dow, an investor would have beaten the picks of the pros in roughly half the contests (that is, without even considering transactions costs or taxes for taxable investors).

    For more details go here:

    http://www.investorhome.com/darts.htm


    #2
    alam

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    View Postbull, on Apr 17 2006, 07:44 AM, said:

    In 1988 the Wall Street Journal began a contest that was inspired by Burton Malkielís book A Random Walk Down Wall Street. In the book, the Princeton Professor theorized that "a blindfolded monkey throwing darts at a newspaperís financial pages could select a portfolio that would do just as well as one carefully selected by experts."

    The Journal set out to create an entertaining contest to test Malkiel's theory and give its readers some new investment ideas in the process. Wall Street Journal staff members typically play the role of the monkeys (the Journal listed liability insurance as one reason for not going all the way and actually using live monkeys).

    The contest has become a popular feature for the Journal and has also drawn much interest and commentary from journalists, investors, and academics. Several academic papers have been written about the contest and its implications (summaries and links are included below).

    The contest began on October 4, 1988 and since then more than 100 contests have been completed under the current rules. Initially the contest lasted one month, but recognizing that the publication of the contest was creating a publicity effect on the proís stock picks, the Journal began measuring the results over a six month period beginning in 1990.

    The rules have changed at various times during the contest, but the current rules are as follows. Each month four "professionals" are given the opportunity to select one stock (long or short) for the following six months. The stocks must meet the following criteria.

    Market capitalization must be at least $50 million.
    Daily trading volume must be at least $100,000.
    Price must be at least $2.
    Stocks must be listed on the NYSE, AMEX, or NASDAQ and any foreign stocks must have an ADR.

    The pro's stock picks compete against four stocks usually chosen by Journal staffers flinging darts at the Wall Street Journal stock tables, which are pasted to a board. At the end of six months, the price appreciation for the proís stocks and the dartboard stocks are compared (dividends are not included). The two best performing pros are invited back for the next contest and two new professionals are added. In the latest twist to the contest, the Journal has begun taking stock picks from Journal readers which will also be compared with the pro's and dart's picks (see 4/8/99 article $$).

    On October 7, 1998 the Journal presented the results of the 100th dartboard contest. So who won the most contests and by how much? The pros won 61 of the 100 contests versus the darts. Thatís better than the 50% that would be expected in an efficient market. On the other hand, the pros losing 39% of the time to a bunch of darts certainly could be viewed as somewhat of an embarrassment for the pros. Additionally, the performance of the pros versus the Dow Jones Industrial Average was less impressive. The pros barely edged the DJIA by a margin of 51 to 49 contests. In other words, simply investing passively in the Dow, an investor would have beaten the picks of the pros in roughly half the contests (that is, without even considering transactions costs or taxes for taxable investors).

    For more details go here:

    http://www.investorhome.com/darts.htm


    Good one. Are you the same "bull" who was a member of "kseforum.com".

    regards

    M.Alam

    #3
    bull

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    View Postalam, on Apr 17 2006, 09:19 AM, said:

    Good one. Are you the same "bull" who was a member of "kseforum.com".

    regards

    M.Alam

    Yes, I am :D

    regards

    #4
    AbDuLmAtEeNkHaN

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    MasshAllah good one Bull bhai Keep it up ....

    Posted Image




    Click Here For: "Daily Reports From Different Brokerage Houses"
    Note: Please make your own due diligence before making any decision

    Regards,
    Abdul Mateen Khan

    #5
    alam

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    View Postbull, on Apr 17 2006, 12:52 PM, said:

    Yes, I am :D

    regards

    I could deduce that by your post. Not many who know about random walk.

    regards

    M.Alam

    PS: I hope Shafiq khan doesnt tag along with you:P

    #6
    bull

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    View Postalam, on Apr 17 2006, 01:08 PM, said:

    I could deduce that by your post. Not many who know about random walk.

    regards

    M.Alam

    PS: I hope Shafiq khan doesnt tag along with you:P

    Haha..he's not attached to me but I see he is back on the other forum giving valuable advice.

    All the best






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