You have probably heard of the study in which monkeys throwing darts on a dartboard with stock names on it could produce portfolios that outperform those picked by professional investors. A few reasons were given for the outperformance, such as size of the companies, Price-to-Book valuation of the stocks, etc. I wonder if the same study were to be repeated for bond picking, would monkeys still outperform professional investors?
There is no study on the above, but my answer to it is probably not. When you pick a stock to buy, you are expecting it to change in the future, whether it is the earnings or dividends increasing or the Price-to-Earnings valuation improving. In essence, you are forecasting the future. This can be seen from the various models for valuing stocks. The Dividend Discount Model, for example, estimates the intrinsic value of a stock as the summation of all future …