march madness_new

Behavior

Bracketology Simulates Stock Picking

Odds, outliers, random – such terms are batted around like gnats among the economists and statisticians here at the Boston College research center that sponsors this blog. Recently, we tossed around some parallels between the art of NCAA Basketball Bracketology and picking stocks or actively managed mutual funds.

Here’s our Final Four:

  • A fresh printout of an unscrawled bracket is like a new pool of money to invest – it engenders the hope of winning big. The thrill can give way to defeat — very suddenly.
  • Admit it: Most people fill in their bracket winners without doing any research on the teams they’re selecting. (And who reads a prospectus?)
  • A team (or stock) on a winning streak is a prime candidate for losing – and it takes only one in the single-elimination championship.
  • Past performance is not a reliable predictor of playoff results. Remember the 2011 NCAA basketball champion? UConn lost last week. And I won’t even mention the Duke Blue Devils.

Send in your own ideas to Squared Away! To do so, comment below.

2 Responses to Bracketology Simulates Stock Picking

  1. Dave says:

    Regarding bullet one: research works similarly.
    Bullet two: you don’t know that and most people read throughout the season.
    Bullet three: no math shows that strong of a disposition.
    Bullet four: but it is better than no information at all.

  2. Kim Blanton, blog writer says:

    Excellent point Dave on bullet three! Perhaps it should’ve read: “A team (like a stock) that won its conference title is also a candidate for the proverbial “upsets” that make the championship so unpredictable – and it takes only one in the single-elimination championship.”