Luck Or Skill?

The efficient markets hypothesis may be the most bitterly debated topics in Finance. Portfolio managers believe that the market is not semistrong form efficient, otherwise their contribution is negligible. However, many proponents argue that beating the market is nearly impossible. Michael Mauboussin, the chief investment strategist at Legg Mason Capital Management, argues that on the skill/luck continuum, stock picking requires just abount as much luck as roulette or slot machines. In part, he argues that the number of intelligent people in the investment industry means that the distinction between the best and the worst narrows. And, as people become more skillful, luck becomes a more important component of performance.