![]() ![]() Therefore, statistically speaking, the effect of luck, should be transitory and over the long run, outcomes should be determined by skill,” she says In statistical terms – the contribution of luck has an expected value of zero. She says one should think of this influence on portfolio values as the influence of luck. Sessions explains that news, if better than expected will drive asset values higher, and if worse than expected will cause asset values to decline. On any given day news can be good or bad, and better or worse than expected.” “News flow can influence markets and asset values in a variety of ways and is generally unpredictable. Mauboussin, from Legg Mason Capital Management, who suggested that “the longest streaks should be held by the most skilful participants.” Stephen Jay Gould, a biologist and sports enthusiast famously summarised that “long streaks are, and must be, a matter of extraordinary luck imposed on great skill.”Īccording to Sessions, the influence of news on portfolio stocks should also be viewed as the influence of luck. While streaks do occur, they are rare.”Īs such, she says it is worth remembering that even a run of truly exceptional performance by a skilled manager is unlikely to persist. “Luck or unexpected events should not be a determining factor in long-term investment outcomes. This is according to Madalet Sessions, Investment Analyst at Nedgroup Investments, who says that too often, investors, particularly when co : One of the biggest mistakes investors make when assessing investment performance is mistaking luck for skill. 20 March 2012 Madalet Sessions, Investment Analyst at Nedgroup Investments ![]()
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