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CAPS / CAPS Addictions 12-Step Program

URL:  http://boards.fool.com/its-the-coin-flippers-of-graham-and-doddsville-24589399.aspx

Subject:  Re: Greetings, Fool! Date:  9/15/2006  5:20 PM
Author:  TMFEldrehad Number:  16 of 122

It's the coin-flippers of Graham-and-Doddsville. If you have thousands of people participating in CAPS, a fair proportion (presumably near half) will outperform the market, if only by chance alone. And a fair subset of those will outperform substantially - even if none of them have any stock-picking ability beyond the average. It will be helpful for users of this tool to have that concept at their reach.

I agree that this is a good concept to keep in mind regarding CAPS. I think it pays to ask ourselves, "Is that player really good, or just lucky?"

That said, due to a recent rule change (discussed more in-depth on the Beta board) there's a mechanism in CAPS that goes a fair way toward separating the 'good' from the 'lucky'.

Accuracy is an important measure in CAPS, and it's pretty much impossible to get to one of the very top spots in overall CAPS without being very near the top in this measure.

Accuracy ranking is based on the statistical probability of achieving the results in a 'random' coin toss environment based on the number of successes and trials for each indvidual investor. If one is investing randomly, it becomes increasingly difficult to 'get lucky' the more pi