Bloomberg TV is reporting a recent research paper on professional basketball players' three-point shooting that could become useful advice to traders.
The researchers studied over 200,000 shots throughout the course of one NBA season, and found that the more the number of 3-pointers a player shoots, the lower their shooting percentage was.
The big takeaway: Although a player was more likely to shoot again if he made a 3-point basket, past performance had nothing to do with future performance because the environment has changed.
There are similar implications here for traders on Wall Street. Just because one risky bet pays off, it may encourage a trader to make a similar trade, but the environment—market conditions—has completely changed. "Past performance is not a predictor of future returns."
It something useful for traders to keep in mind as they close their books upon year's end, but this is also a consideration investors should remember as they look which funds they want to put their money in.
After all, we all know John Paulson isn't doing too hot this year.
Here's the video of the explainer:
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