From: Robert J. Bradbury (bradbury@aeiveos.com)
Date: Sat Jun 14 2003 - 17:09:25 MDT
On Sat, 14 Jun 2003, Eliezer S. Yudkowsky wrote:
> Does not follow. There are people who win the lottery; it doesn't mean
> that those people alone have discovered the secret pattern of winning
> numbers. It means that a lot of people tried, and a few succeeded, at the
> chance probability. Are there more investors who do well than chance
> would lead you to expect?
Eliezer, are you assuming that the market behaves as a game of chance?
I can speak authoritatively as an employee who once had incentive
stock options that I tended to trade on informtion (or more accurately
impressions) that were not available to the average public investor.
They were based on information regarding what one knew what oneself
was working on or what others were working on within the company that
were not released to the public. I would say that a very well informed
analyst who really studies a company (and its industry) has similar
abilities to evaluate a company prospects and trends and can make
"better than average" recommendations. The average investor on the
other hand cannot (or does not usually) take the time to get to know
the details of a company (and the industry in which it resides) and
cannot therefore make an "informed" investment. There is simply too
much information out there for people who are not "within" the industry
or who are not professional analysts.
Now that doesn't mean that employees or analysts always get it right.
But it isn't a game of "chance". To balance this one has things like
mutual funds and certified financial planners who are supposed to
know more than the average investor and have better chances at
performing better than "chance".
Robert
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