Random accumulation and simulated monkeys figure quite deliberately in this two-part study (it parallels the recent findings of the Ig Nobel Prize-winning team who won their Ig for showing that promoting people at random can produce better results than promoting by other methods):
“An evaluation of alternative equity indices. Part 1: Heuristic and optimised weighting schemes” and ” An evaluation of alternative equity indices. Part 2: Fundamental weighting schemes”, Andrew Clare [pictured here], Nick Motson and Steve Thomas, Cass Business School, published online, March 2013. (Thanks to investigator Frederic Lepage for bringing this to our attention.) The authors explain:
“In his book Fooled by Randomness, Nassim Taleb warns us that financial market participants often mistake unsystematic, random events for systematic and explicable phenomena. Or as Professor Taleb puts it: ‘If one puts an infinite number of monkeys in front of (strongly built) typewriters and lets them clap away (without destroying the machinery), there is a certainty that one of them will come out with an exact version of the ‘Iliad.’ Once that hero among monkeys is found, would any reader invest [their] life’s savings on a bet that the monkey would write the ‘Odyssey‘ next?’
“7.1 A simian experiment: To try to distinguish between ‘luck and design’ we set up an experiment. Instead of determining weights at the end of each calendar year using the techniques described in Sections 2 and 3, and then forming the index every year using the appropriate weights, we employed a more random approach. In essence we programmed the computer to simulate the stock picking abilities of ten million monkeys.”
BONUS: Gizmodo’s take on the matter, and Technology Review‘s take
BONUS: The logic of the stock market also got a good looking at in Ig Nobel Prize winner Danny Oppenheimer‘s 2006 study “Predicting short-term stock fluctuations by using processing fluency“, which was only indirectly related to study [“Consequences of Erudite Vernacular Utilized Irrespective of Necessity: Problems with Using Long Words Needlessly.”] for which he won an Ig Nobel Prize. (Thanks to investigator Mary Beckman for indirectly reminding us about this.)