Peter Lynch or Dart-throwing Monkey?

Published 25 Jun 2018
Reference 6239
Region Global
Summary

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).

Teaching 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
  • Q41718