Friday, March 18, 2011

Finance Links: Skill versus Luck

Two interesting articles:

1. Luck versus skill: How can you tell? Aswath Damodaran on why it is much harder to separate the two in finance than in other fields like sports.

2. Untangling skill and luck (pdf). The introduction to this piece by Michael Mauboussin itself is enough to make you want to read on.
For almost two centuries, Spain has hosted an enormously popular Christmas lottery. Based on payout, it is the biggest lottery in the world and nearly all Spaniards play. In the mid 1970s, a man sought a ticket with the last two digits ending in 48. He found a ticket, bought it, and then won the lottery. When asked why he was so intent on finding that number, he replied, "I dreamed of the number seven for seven straight nights. And 7 times 7 is 48."

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