Understanding skill - a paradox
Analyzes the paradox of skill in investing, highlighting abundant managerial skill, the need for opportunity, and evaluating performance through persistent and predictive statistics like active share for identifying potential excess returns.
obj.portfolioconstructionforum.edu.auThat got me thinking: What would be the most interesting and useful information anyone could get their hands on?
Years ago I asked that question to Yale economist Robert Shiller. “The exact role of luck in successful outcomes,” he answered.
The discussion of luck versus skill in investment management goes far beyond theoreticals and should directly inform the way that behavioral investors structure their portfolios. Understanding that markets are part luck and part skill informs us that we should emphasize rules over practice and that we should hold portfolios that are diverse enough
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