Probabilistic investing
or how to win the Globe and Mail's Stock Picking Contest (50% of the time)
DOI:
https://doi.org/10.61190/fsr.v14i3.4826Keywords:
Portfolio management, Investment decisions, Personal financeAbstract
For the past nine years the Globe and Mail (Canada's oldest national daily) newspaper has held an annual stock picking contest. In 2002, 2003, and then again in 2004, a finance professor won this contest. Motivated and inspired by the contest, this article shows that a rational player can increase the odds of winning an investment contest to a 50/50 chance by selecting a stock that (1) is highly volatile, and (2) negatively correlated with the other selections, or (3) exhibits a negative empirical beta. We conclude by arguing that picking stocks to win an investment game or contest is quite different from selecting securities for a personal investment portfolio.
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