Cat outperforms professionals in stock market
The random stock selections of a cat named Orlando amassed more profit than the picks made by investment managers.
Fri, Jan 18, 2013 at 01:07 PM
This orange tabby didn't pick the stocks, but perhaps there's some shared feline pride in Orlando's feat. (Photo: jamesberghout/iStockphoto)
In 2012, a British newspaper ran a year-long experiment to see who could pick the most profitable stocks: professional investment managers, students or an orange tabby cat named Orlando.
Orlando won by amassing 5,542 British pounds to the investors’ 5,176 pounds. The students finished with 4,480 pounds.
At the beginning of the year, each team was given 5,000 pounds to invest in five companies from the FTSE All-Share index. Every three months they were allowed to trade their stocks.
Orlando made his stock selections by throwing a toy mouse onto a grid of numbers representing different companies.
During the last quarter of 2012, all but one of Orlando’s stocks rose, including plastics company Filtrona, which the financially savvy feline had swapped for underperforming Scottish American Investment Trust in September.
The professional investors refused to swap any of their stocks in the third quarter, which dragged their portfolio down by 7 percent.
But some experts weren’t at all shocked that a cat outperformed the professionals.
"The cat winning shouldn't surprise anyone. That's a randomly expected outcome. That is what the efficient market is all about," Larry Swedroe, principal at Buckingham Asset Management told ABC News.
"The market is not always efficient; there are mispriced securities, but they tend to appear and disappear quickly. By the time you figure out that someone out there has that strategy, it's too late. It's called the tyranny of efficient markets," Swedroe said.
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