By |Published On: September 24th, 2014|Categories: Uncategorized|

A professor buddy sent a link to an outstanding article that mentions a study where researchers study the performance of a rat’s ability to learn how to “beat the market:”

Marcovici says the rats “outperformed some of the world’s leading human fund managers.” The rats were trained to press a red or green button to give buy or sell signals, after listening to ticker tape movements represented as sounds. If they called the market right they were fed, if they called it wrong they got a small electric shock. Male and female rats performed equally well. The second generation of rattraders, cross-bred from the best performers in the first generation, appeared to have even better performance, although this is a preliminary result, according to the text. Marcovici’s plan, he writes, is to breed enough of them to set up a hedge fund.

Here is a picture depicting the study:

rat
A few key takeaways from the research:

  1. Some rats outperform the greatest hedge fund managers in the world.
  2. Male and female rats perform equally well.
  3. Rats, sired by rats with great performance, tend to perform better than “normal” rats in the population.

The researchers end-state is to breed a crew of genius rats and start a hedge fund so he can charge 2/20.
I can’t help but think this study is 100% in jest, but as far as I can tell, the research is fairly serious…even though the outcome and methodology are hilarious/frightening

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About the Author: Wesley Gray, PhD

Wesley Gray, PhD
After serving as a Captain in the United States Marine Corps, Dr. Gray earned an MBA and a PhD in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Next, Wes took an academic job in his wife’s hometown of Philadelphia and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. He is a contributor to multiple industry publications and regularly speaks to professional investor groups across the country. Wes has published multiple academic papers and four books, including Embedded (Naval Institute Press, 2009), Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016). Dr. Gray currently resides in Palmas Del Mar Puerto Rico with his wife and three children. He recently finished the Leadville 100 ultramarathon race and promises to make better life decisions in the future.

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