Unit 1 Analysts vs Orangutans
Many people believe that financial consultants are the experts in picking winning stocks, and that making money in the financial industry is a highly technical and overly-complex task reserved
exclusively for the stock wizards. Indeed, for those outside the industry the market is
difficult to understand. Even after decades, no one seems to be able to decipher the market and beat it.
The truth is that no one—not even the professional analyst or the self-proclaimed prodigy—truly understands how to make money via the market, and no one has ever had any clue about what is
going to happen on the market. The following story will show you why. A San Francisco Chronicle article indicated that an orangutan named Jolyn living in Vallejo, California was asked to select
a list of stocks. Eight professional analysts also did the same at the beginning of the year, and compared the performance of their stock picks at the year end.
The results showed that Jolyn beat the investment advisers as often as they beat her. The implication is that hiring professional analysts to get their advice may not be worth the money. Can
the stock market be predicted? This is a question everyone is asking and no one has yet answered. Burton Malkiel once said “A blindfolded monkey throwing darts at a newspaper’s financial pages
could select a portfolio that would do just as well as one carefully selected by experts.” As the article of San Francisco Chronicle has shown, Malkiel’s statement seems to be true.
