Reducing The Behavior Gap

Reducing The Behavior Gap

I’ve read a handful of books recently that have discussed the psychology of investing (Thinking In Bets, The Geometry of Wealth, The Behavioral Investor) and I’ve become more enlightened on the concept of the behavior gap. Typically, I’m more attracted to the technical books since I have more of an analytical mind. However, reading these books has turned me onto something new and I wish I would have paid more attention to the behavior gap in my earlier years of investing.

How To Win Your NCAA Tournament Bracket Pool

Get lucky. End of story.

In reality, there is a ton of luck involved. I don’t appreciate when I get beat by my wife who makes her tournament picks based on her favorite team mascot or “their jerseys look cute”.

This year I’m going to focus on the historical performance and statistics like a true market technician would (assuming we have absolute faith in the ranking committee).

Every year there are four #1 seeds that look unstoppable until they all meet each other in the Final Four, then all bets are off. But, picking your Final Four to contain all of the #1 seeds has historically been a terrible bet.

Based on the data in the table below you should be selecting at least two #1 seeds to reach the Final Four. The reason you wouldn’t select only one #1 team to reach the Final Four (even though it has a higher percentage) is because the combined percentage that two or more teams will make it is greater. I’ll give you some time to go back now and erase a couple of those #1 seeds you already penciled in.

Now that you have your two #1 seeds selected you can now try to figure out who has the best chance of getting to the Final Four as a lower seed.

Based on the data in the table below, I would be inclined to pick at least one #2 seed if not two. It all depends on the strength of schedule, match ups, and the likelihood you think those lower seeds can navigate through their side of the bracket. Again, luck is involved.

This year, my followers love Duke as the #1 seed and Kentucky as the #2 seed. I think I’m going against the herd and going with Michigan State as the #2 seed to take down Duke and Tennessee to beat Gonzaga in the Final. This is another tactic I use to differentiate myself in case one of the big favorites goes down early and screws up everyone else’s bracket but mine. Hopefully this is dead wrong so I can be featured on @OldTakesExposed.

Note that I only focused this article on picking the correct Final Four teams. The way that most bracket scoring systems work, if you pick the Final Four correctly you will have a much greater chance of winning.

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Now that you know the statistics, I’m here to burst your bubble and tell you that past performance does not predict future results. Thanks for playing.

May the odds be ever in your favor. Go Vols.