A house cat named Orlando did a better job managing investments over the year 2012 than a team of professional money managers, the British paper The Observer . The paper ran a contest where it gave three teams—a trio of money managers, a group of schoolchildren, and the cat—an imaginary £5,000 ($8.046.50 at today's exchange rate) at the beginning of the year and told them they could make trades quarterly on stocks in the FTSE All-Share Index. The professionals were Justin Urquhart Stewart, of Seven Investment Management, Paul Kavanagh of Killick & Company, a brokerage, and Andy Brough of Schroders. The students were from John Warner School in Hoddesdon, England, a community institution for 11-to-18-year-olds. The cat, Orlando, is identified only as "a ginger feline."
At the end of the year, the professionals had £5,176, the students were down to £4,840, and Orlando had amassed £5,542. How did he do it? "While the professionals used their decades of investment knowledge and traditional stock-picking methods, the cat selected stocks by throwing his favorite toy mouse on a grid of numbers allocated to different companies."
The pros were beating Orlando until the fourth quarter, but he cannily traded his shares in Filtrona, a plastics company, for "under-performing Scottish American Investment Trust."
As the newspaper concludes:
The result indicates that the "random walk hypothesis", popularised in economist Burton Malkiel's book A Random Walk Down Wall Street, is perhaps truer than we thought. Burkiel's book explores the idea that share prices move completely at random, making entirely unpredictable.
Read The Observer's article .