Are Stock Pickers Worth Their Salt?

After reading "Four pros took the $100,000 challenge. Two passed" (Special Report, June 19)--about how these pros picked stocks--I can only conclude that their picks are no better than chance. The average return of these four managers, +14.9% with a standard error of 3.0%, is not significantly different from the S&P 500-stock index gain of +16.6%. Furthermore, even though a sample of four is small, their gains (21.2%, 16.9%, 14.6%, and 6.9%) have a distribution consistent with a normally distributed random variable. These results raise the question: Do money managers have useful information for picking stocks that will provide an advantage over just investing in a portfolio that approximates a stock index? I am inclined to say no.

Mark R. Weber

Rockefeller University

New York

Before it's here, it's on the Bloomberg Terminal.