A day at the races

by Mauro Scanu | Jan 18, 2010 in Science | Leave A Comment

In 1986 Stephen Ceci and Jeffrey Liker, two American psychologists, published a study on expert racetrack handicappers. Success predicting odds at the racetrack is an ability comparable with that of financial brokers since that expert handicappers use complex models involving multiple interactions effects. Simple models fail to account for the complexity of their decisions.

Moreover Ceci and Liker showed that expertise in betting on horse races had zero correlation with IQ, the best single measure that psychologists have because it correlates with so many cognitive capacities. So thinking about risk and uncertainty needs a special kind of intelligence.

in 2008 Dylan Evans, a British scientist, made the hypothesis that there is a special purpose skill-set at the core of which is the ability to estimate probabilities accurately: this is called “risk intelligence”. So Evans and Benjamin Jakobus, a German computer programmer, decided to launch Projection Point, a private, independent, non-profitmaking project aimed to gather information about this form of intelligence. Projection Point was officially launched in the early hours of Friday 1 January 2010. By the following day, over 1000 people had visited the site, of whom 300 had chosen to take part in the study. About 50 of these participants were derivatives traders and other finance professionals, and some of their results are quite impressive.

If you want to test your risk intelligence you can visit the project website.

I bet you will try…