Crowd Sourced Stock Portfolio is a website where people watch other people play video games, which apparently has a large market. The reason why I am writing about is because of an experiment they are currently running on their public forums. A group of users has started a crowd sourced stock portfolio over the website. The portfolio strategy essentially is determined by a voting system over the forum. The mechanism for stock purchases is a random selection of the suggestions from the group on what stock to buy. A stock-picking robot will randomly select one stock that was voted for in the past 5 minutes and spend $10,000 to buy as many shares as possible at market price. This process will then be started over for the next 5 minutes, and keeps repeating. This experiment is being run entirely on a virtual market.

Although his form of portfolio management is completely void of financial expertise and guidance, I think this has some interesting characteristics that I think warrant some thought. Stock performance is very dependent on the public perception of the stock. When the owners of the stock lose faith in that stock, they tend to sell the stock, causing the price to drop along with it. It is almost impossible for financial experts to predict what is going to happen to the public perception of the stock because it can be swayed for so many unpredictable reasons.

I think that this type of crowd-sourced stock portfolio is intriguing if it can actually capture public opinion on stocks. If the general opinion of a certain stock in the group is to buy, then there will be a higher chance of having that stock picked through random selection. The stock selection process is essentially completely dependent on public opinion. This particular platform isn’t sophisticated enough to make it a viable investment option, but I think this method is fairly interesting because of its ability to make decisions based on what people are feeling about a certain stock.

I think if enough people were included in management of this type of portfolio, and it was able to operate fast enough, it might have the ability to remain ahead of the stock market’s movements. If this method actually could capture the public perception of a stock before the stock moves in that direction, it could theoretically be effective at predicting where stocks are likely to move, and stay on the right side of that movement.

I’m not sure whether this type of system is possible or not, but it is a fascinating experiment. Currently the experiment has put together a collection of stocks that have collectively grown in value over the scope of the trial. Although this growth might just be from a thriving stock market, I will be interested to see how their experiment turns out.

One Reply to “Crowd Sourced Stock Portfolio”

  1. Great post. This brings to mind information markets, which are generally very good at prediction. The interesting distinction here is that those voting have absolutely no incentive to provide relevant information, apart from enjoying participation. For that reason, I think the novelty is likely to be a factor in motivation here and thus, difficult to sustain in a larger/longer setting.

    See the excellent work of Justin Wolfers on info markets.

Leave a Reply

Your email address will not be published. Required fields are marked *