Ignoring the many fund managers who will tell you their process is all the advantage they really need, ‘edges’ in investment are few and far between. And even if they were more common, how much would that help? Nassim Taleb certainly had his doubts when, back in 2016, he tweeted: “I conjecture that, if you gave an investor the next day’s news 24 hours in advance, he would go bust in less than a year.”
Academics Victor Haghani and James White later decided to put that observation to the test, setting up an experiment where they gave participants $50 each and the opportunity to grow that stake by trading in the S&P 500 index and 30-year US treasury bonds with the information on the front page of the Wall Street Journal one day in advance – albeit with stock and bond price data blacked out.
Given the title of the resulting paper was When a Crystal Ball Isn’t Enough to Make You Rich, you can likely guess how this all turned out but, for the record, about half of the participants lost money, with one in six actually going bust. Overall, the average payout was 3.2% – statistically indistinguishable from breaking even – which Haghani and White attributed to the twin investments sins of excessive risk-taking and poor trade-sizing.
To put it another way, this sub-optimal showing stemmed from the participants being rubbish at guessing price movements and also at taking positions that took account of their being rubbish at guessing price movements. Or as Taleb himself noted rather more sympathetically, after reading the paper, they failed to capitalise because “you don’t know beforehand what is noise” and “overestimate the information”.
All of which, of course, brings us to the FPL ‘double gameweek’ that saw Arsenal play twice as many times as any other team and therefore offer the potential for twice as many points. Indeed, if you were to triple-captain Gabriel, as many did, while also owning Raya and Timber, say, you could be 10-times leveraged on the meanest defence in the league – the sort of edge you rarely get to enjoy in the stockmarket. Well, not legally.
Fantasy managers duly piled into Arsenal assets and, as you can see in the top right ‘Herdwatch’ chart at the end of this piece, four of the six top ‘buys’ ahead of Gameweek 26 were based at the Emirates. As you can also see from the chart, of these only Rice came close to delivering while the other double-digit hauls from Arsenal were Saka (13 points; 8% ownership), Madueke (13; sub-2%) and Hincapie (15; sub-1%).
“If you were to triple-captain Gabriel, as many did, while also owning Raya and Timber, say, you could be 10-times leveraged on the meanest defence in the league – the sort of edge you rarely get to enjoy in the stockmarket. Well, not legally.
With Gabriel especially, what began as an argument based on numbers and opportunity quickly morphed into something more bubbly, based on momentum and fear of missing out.”
Of the majorly-owned defensive unit, meanwhile Gabriel scored 7 points, Timber 3, Saliba 1 and goalkeeper Raya 3 – a combined total of 14 that, FPL being FPL, was outperformed by Liverpool defender (and recently discarded MeanReversionMachine index member) Virgil scoring 17 points in his only match of the week. And that as Sunderland lost at home for the first time this season too.
Did all those overweighting Arsenal – and to a lesser extend Wolves, who also doubled – ‘overestimate the information’ of a double gameweek? I cannot make up my mind – though I guarantee even more FPL players will act in exactly the same way when the bigger doubles likely materialise in Gameweeks 33 and 36. I know I certainly will – while my own exposure last week of Gabriel, Timber and Rice was pretty par for the course.
As for Taleb’s ‘noise’ observation, that does feel more relevant – particularly on the captaincy front. Both Gabriel and Rice were sensible enough captains in theory and, as it turned out, the latter was in practice too – but as triple captains? With Gabriel especially, what began as an argument based on numbers and opportunity quickly morphed into something more bubbly, based on momentum and fear of missing out.
Certainly my own decision merely to captain Gabriel rather than triple-captain him was based as much on cowardice and attempted damage limitation as the hope he might sneak a goal on top of a presumed minimum of one clean sheet and maybe a defcon bonus. All of which – and not for the first time – makes me grateful for the relatively stress-free nature of the MeanReversionMachine, which happened to enjoy another good week.
No captaincy issues for starters – just Haaland, as usual – and, as you can see below, good scores from Semenyo, Rice and Guehi, in addition to the double contributions, great and small, from Rice, Gabriel and Raya. All of which amounted to a gameweek rank just inside 1.5 million and an overall rank back inside the 2.5 million mark.
No dramas with our benchmark composition either, as you can see next, with limited action in the market over the last week allowing us to save another transfer. Change will come soon enough, though, as Chelsea’s fixtures soon turn for the worse and Brentford’s and Liverpool’s for the better, which in all probability means a return for former portfolio members Thiago and – hindsight alert – Virgil in place of Joao Pedro and Chalobah.
Source: Fantasy Premier League
For now, however, as our Herdwatch tables show, the wider market continues to pile into Chelsea attackers Pedro and Palmer – hardly surprising, given the combined 62 points the pair have scored over the last three gameweeks and the fact they face Burnley next. Buyers will be hoping they have shown a similar level of good judgement to their peers three weeks ago, whose choices have largely scored unusually heavily since.
Source: Fantasy Premier League
