The Proven Power of the People

Sep 20th, 2007 | Filed under: Industry

This has been a busy week at Cake global HQ with the public alpha launch at TechCrunch40 on Monday afternoon.

The response to the service has been overwhelming and we are growing like crazy.

Which means it’s a perfect time to tell you about Josh Coval, a Finance professor at Harvard Business School, and a good friend of ours. Josh is one of the leading academics in the behavioral finance field- a study of the connection between human emotion and biases and our economic decisions. An example of this kind of research is my earlier post talking about a white paper that found a connection between zip codes and trading activity (ie, we already invest like our friends and family because we talk about it with one another).

Josh’s research awards include the 2000 and 2005 Smith-Breeden Prize for the best paper in the Journal of Finance and he has been featured in The Economist, The Wall Street Journal, The New York Times, The Chicago Tribune, Time, Money Magazine, and The Financial Times.

He’s smart.

So it should come as no surprise that Josh found something interesting when he analyzed data of actual individual investors returns over a 6 year period spanning 1991-1996. In his white paper "Can Individual Investors Beat the Market," Josh found that the top 10% individual investors consistently beat the market each year and by a large margin. Josh’s findings suggest that there is a core group of individuals, namely 4MM of the 40MM who invest, that are worth following. If you knew what all of these people were doing, you could tie historical outperformance to real-time trading activity, for the benefit of everybody. The collective wisdom of the few.

Which beats the performance of nearly every mutual fund, professional investors, investing magazines, and pop-star investment gurus.

And only Cake has the ability to allow you to do so. Cake is the new way to invest. Try it out for yourself. There is no downside.