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Selected Case

published: 25 Jun 2018

  • Topic: Economics & Finance
  • Region: Global

Abstract:
This exercise demonstrates one difficulty in distinguishing between luck and skill. Participants individually roll dice to simulate the performance of fund managers. Some fund managers have a greater chance of success than others, but the lower performers are more plentiful. The chance element in observed performance makes it challenging to determine a given manager’s type (a genius or a dart-throwing monkey).

Pedagogical Objectives:
Illustrate in a hands-on way the challenge of distinguishing between skill and luck. Encourage greater skepticism when evaluating the basis for performance.

Keywords:
Chance, Luck, Bias, Skill, Probability


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