Cowles presented his research on December 31st, rounding off a year in which he also established the Cowles Commission for Research in Economics, subsequently to become a veritable breeding ground for Nobel-prize winning ideas (Robert Shiller’s being the most recently recognised).

And his comparison of stock selection strategies to market averages and random portfolios is thoroughly modern.   With almost identical methods and conclusions2, the progeny of Cowles’ research continue to stimulate debate.


  1. Cowles’ ideas are considerably ahead of their time. His use of playing cards to simulate random portfolios is a more than a decade prior to Stanislaw Ulam’s & Von Neuman’s celebrated first use of the “Monte Carlo” method at Los Alamos in work relating to the development of the hydrogen bomb.
  2. Today a market-cap weighted benchmark is usually seen as the bogey, but it would be more than 30 years before William F. Sharpe explained why.

About Timothy Edwards
Tim Edwards is director of Index Investment Strategy for S&P Dow Jones Indices. The group provides research and commentary on the entire S&P Dow Jones Indices product set, including U.S. and global equities, commodities, fixed income, and economic indices.

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