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...

‍


Subscribe and sign up with your email address to receive the latest news and updates
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

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

Conversation with Dr. Daniel Crosby on his Standard Deviations Podcast

Drew joins Dr. Daniel Crosby on the Standard Deviations podcast.

Asset Pricing
Behavioural Finance
Markets
Sports
Read More
Text Link

On the Disincentives of Investing in Public vs. Private Equity; and Implications for Pricing and Returns

Just as the public markets can be affected by short term flows, is it possible that private market valuations, and the periodic marks of particular private investments, have been affected by increasing allocation tilts toward private equity?

Markets
Valuation
Read More
Text Link

Why European Stocks Might Win

In an op-ed for Marketwatch, Drew explodes the myth about European companies, and reveals where he thinks the opportunities are today.

Markets
Stock Picking
Valuation
Read More
Text Link

Finding Alpha in Europe

Drew and Toby chat about narrative-driven investing, Ben Graham's voting machine, behavioral explanations for stock mispricing, and managing a concentrated portfolio of investment ideas.

Markets
Behavioural Finance
Asset Pricing
Passive vs Active
Factors
Read More
Text Link

Sell in May and Go Away?

Turns out there may actually be something to the old Sell in May and Go Away adage - at least over the last 80+ years.

Markets
Asset Pricing
Read More
Text Link

If Growth Stocks Sell Off Will They Bring Value Stocks Down with Them?

Growth stocks crushed just about everything from 2017 through 2021. Not that they necessarily will, but if they do give back some or all of their gains, given their weightings, times will be tough for broader indices. But what about the value names within them, will they sell off in sympathy as well? Of course no one knows, including ourselves, but we take a quick look at behavior of value names as the tech bubble sold off from 2000 through 2002. This example may be worth some consideration.

Markets
Factors
Read More
Navigations
HomeTeamDrew's viewsPressContact
Disclaimers
Legal & regulatoryPrivacy policyCookies policy
How to get in Touch
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 2022
Website by SW10media.com
homeTeamdrew's viewspressCOntactDisclaimers