Back to Drew's Views
December 11, 2019
Previous
Next

Prediction, Publicity, and Paul the Octopus

Markets
Sports

Unlike many other market observers, we just don’t see the point in discussing or debating the macroeconomics driving overall markets, volatility, or sentiment.  

We’re in the camp that thinks successful prediction of market direction is, broadly, a coin flip.   Well, we’re sure that we don’t have the skill; although we’re happy to concede that some of our top-down macro friends appear to do this quite well.  

However, over any time horizon that isn’t decades long, it is extremely difficult for any of us to know whether their “success” is due to luck or skill.

Paul the Octopus.png
I’m good at stockpicking, too

We're all familiar with the 50/50 probability of heads or tails when flipping a fair coin.  It's also fairly easy to grasp that there is a 25% chance of flipping heads (or tails) twice in a row.  With each successive coin flip, however, probability becomes slightly less straightforward, and is particularly difficult when contemplating a population of coin flippers.  

Let’s put this in the context of soccer, or football as we call it here in the UK.  Back in 2010, during the World Cup, a seemingly omniscient German-raised octopus called Paul received quite a lot of attention.  Paul, it seemed, was really good at picking winners.  He picked the winner in all seven of Germany’s matches, even his home country’s loss to Spain; and then – much to the delight of our friends at Gamesa and chagrin to those at Randstad – Paul even picked Spain over Holland in the final.  

Yes, Paul the Octopus was eight for eight, and briefly became the most celebrated marine invertebrate in the world, much to the chagrin of the equally clueless, albeit confident and determined, SpongeBob SquarePants.

Paul was – metaphorically –flipping coins, and got lucky eight times in a row.  The odds against doing so were 256-1.  Impressive indeed!  However, with two billion octopuses swimming in the oceans, there were eight million other eight-tentacled freaks out there just as good as Paul.  They just didn’t get any publicity.

‍

Paul the Octopus - chart.png
Warhol's Law evidently applied to Paul as well...

‍

FOOTNOTES

Download PDF

Topics

Markets
Sports

DISCLAIMER

The views and opinions expressed in this post are those of the post’s author and do not necessarily reflect the views of Albert Bridge Capital, or its affiliates. This post has been provided solely for information purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The author makes no representations as to the accuracy or completeness of any information in this post or found by following any link in this post.

YOU MIGHT ALSO LIKE

Text Link

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.

Text Link
Text Link

Archegos, Disclosure, and Price Discovery

This had a lot to do with bad banking, but most to do with an overzealous client. Meanwhile, it had very little to do with holdings disclosure. Sure, our kneejerk reaction is (always) for more regulation, because we want to believe that some regulatory response will immediately solve all our future problems. But we should question this intuition.

Asset Pricing
Portfolio Management
Markets
Read More
Text Link

A Memo to Investors

I know, these are weird and trying times. It all makes you wonder what the point of stock-picking is. What is the purpose of kicking the tires, looking under the hood, and doing our jobs?

Stock Picking
Markets
Valuation
Asset Pricing
Behavioural Finance
Read More
Text Link

Investors? Possibly you!

FATMAN-G. No, that isn’t my rap name, although vaguely appropriate (I mean, the G part of course). That’s our new moniker for the Avengers[1] of the equity capital markets, to which we have now added Tesla. FATMAN-G is Facebook, Amazon, Tesla, Microsoft, Apple, Netflix, and Google.

Stock Picking
Markets
Read More
Text Link

Avengers Assemble!

Amazon is, very simply, a tremendous company. Google is also a tremendous company. The same goes for Microsoft, Apple, Netflix, and Facebook. These are the superheroes of capital markets. In these FAMANG stocks, the Avengers have assembled.

Markets
Stock Picking
Read More
Text Link

How Did This Even Happen?

No, I’m not talking about the winner of the Presidential election or COVID-19 or 2020. I’m talking about something I saw Rex Chapman tweet out over the weekend.

Sports
Read More
Text Link

The Hot-Hand Fallacy Fallacy Fallacy?

Many of you will be familiar with the so-called “hot-hand” fallacy, or (perhaps) the lack thereof.

Factors
Sports
Stock Picking
Read More
Navigations
HomeTeamDrew's viewsPressContact
About Albert Bridge Capital

Albert Bridge Capital manages concentrated long-only equity portfolios for institutional investors.The hallmark of its Alpha Europe strategy is the application of tenets of behavioural finance to a rigorous, fundamental, process-oriented research process.

Regulatory Disclaimers
Stewardship codePillar three disclosureRTS 28Legal & regulatoryPrivacy policyCookies policy
How to get in Touch
Michelin House
Suite 109, 81 Fulham Road
London, SW3 6RD
info@albertbridgecapital.com

Subscribe to Drew's Views

No spam. Unsubscribe anytime.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Albert Bridge Capital LLP is authorised and regulated by the Financial Conduct Authority of the United Kingdom © Albert Bridge Capital 2021.
Website by SW10media.com
Archegos, Disclosure, and Price Discovery
It's All About the Fundies
On Unlimited Upside
A Memo to Investors
Investors? Possibly you!
Avengers Assemble!
How Did This Even Happen?
Was “Value” Just a Hot Hand Thing?
The Hot-Hand Fallacy Fallacy Fallacy?
Cue the Camouflage
The Times that Try Stock-Pickers’ Souls
A Different Game?
Heads I Win
A New Ice Age?
Grandpa Stocks
Bubblicious?
On Negative Oil and Futures Prices
In Flew Enza
COVID-19 and Equity Markets
Regulators to the Rescue?
Perspective
We Don’t Make Pizzas
Ben Graham the Growth Investor?
Not a Bad Decade
On the Impact of the FAMANGs
Europe vs the US: Is it all about sector exposures?
Behavioural Finance is Finance
America’s Decade
Known Unknowns and Share Prices
Prediction, Publicity, and Paul the Octopus
Are Company Visits Good or Bad?
Everybody Was Kung Fu Fighting?
Voting Machines and Weighing Machines
The DCF is the Randy Watson of Valuation
The Sacrilegious Diaries: Measuring the Impact of Portfolio Turnover
Passively Irrational?
Imagine No Inflation
The Sacrilegious Diaries: The Benefits of Turnover
Stay in the Game
I’m Volatility?
Woody was Right
When You Can’t Wait For Tomorrow
James Harden and Alpha
Groundhog Day and Overnight Returns
Debiasing and Alpha
Peak “Peak Car” ?
The Right Way
The First Step to Regaining Credibility
The Futility of Market Timing
Visualizing the Arithmetic of Active Management
123 Years of the Dow
Sweet Emotion?
Share Buybacks, Bad Companies, and Bear Markets
Risk and Portfolio Theory
Keeping Calm and Carrying On
Reminiscences of a Stock Operator: The Volkswagen Chronicles, Ten Years Later
We’d Rather Not Sleep
Factor Timing, Should You Try?
The Mathematics of Maintaining Bet Size
The Grandfather of Behavioural Investing
On Sexual Chocolate and Semi-Annual Reporting
Island Economies and Risk
Build a Bear?
Data Science and Alpha
We’re all Value Investors
Hunting for Alpha
Career Risk, Alpha, and Contrarian Investing
Passive Flows and Wheelbarrows
God Bless the Shorts
Sell in May, and Go Away?
Equilibrium Happens
Horses and Stocks
Peak Quality?
Bill Sharpe and Hank Aaron
Unwarrented
The Search for Excellence and the Loser’s Game
Fooled by Non-Randomness
Half Hearted Is Half Minded
Still Superman, but without the cape
122 year Dow Jones Histogram: Putting 2017 into context
Pegs, P/E'S and the Value Premium
Rick Barry and Lewis Carroll
Secular Winners and Value Investing
Robots and Alpha
The Voting Machine
Prevous
Next
homeBIOSdrew's viewspressCOntactRegulatory