M6 investment challenge: the role of luck and strategic considerations

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11640%2F25%3A00638902" target="_blank" >RIV/00216208:11640/25:00638902 - isvavai.cz</a>

Result on the web

<a href="https://doi.org/10.1016/j.ijforecast.2025.03.005" target="_blank" >https://doi.org/10.1016/j.ijforecast.2025.03.005</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.ijforecast.2025.03.005" target="_blank" >10.1016/j.ijforecast.2025.03.005</a>

Result language

angličtina

Original language name

M6 investment challenge: the role of luck and strategic considerations

Original language description

This article investigates the influence of luck and strategic considerations on the performance of teams participating in the M6 investment challenge. We find that there is insufficient evidence to suggest that the extreme Sharpe ratios observed are beyond what one would expect by chance, given the number of teams, and thus not necessarily indicative of the possibility of consistently attaining abnormal returns. These findings are consistent with the efficient-market hypothesis, reinforcing the notion that any apparent outperformance is indistinguishable from statistical noise. Furthermore, we introduce a stylized model of the competition to derive and analyze a portfolio strategy optimized for attaining the top rank. The results demonstrate that the task of achieving the top rank is not necessarily identical to that of attaining the best investment returns in expectation. It is possible to improve one’s chances of winning, even without the ability to attain abnormal returns, by constructing a portfolio that deviates from the strategies of competitors. Empirical analysis of submitted portfolios shows that teams that differentiated themselves from competitors by holding a higher proportion of short positions were more than eight times as likely to secure a top rank, aligning with findings from the stylized model.

Czech name

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Czech description

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Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

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OECD FORD branch

50202 - Applied Economics, Econometrics

Project

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Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2025

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

International Journal of Forecasting

ISSN

0169-2070

e-ISSN

1872-8200

Volume of the periodical

41

Issue of the periodical within the volume

4

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

15

Pages from-to

1413-1427

UT code for WoS article

001570759600004

EID of the result in the Scopus database

2-s2.0-105003936678