So you think you are a good investor?

6th Feb '10 by Stockhound

6 comments 3100 reads

Ok - quick quiz... Answer these questions to learn if you are likely to be a good investor.

1. A bat and ball together cost $1.10 in total. The bat costs a dollar more than the ball. How much does the ball cost.

2. If it takes 5 minutes for 5 machines to make 5 widgets how long would it take 100 machines to make 100 widgets?

3. In a lake there is a patch of lily pads. Every day the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long will it take to cover half the lake?

Courtesy of the Behavioural Finance book by Montier ....

If you do post a reply you ain't allowed to edit it, and you aren't allowed to look at anyone else's answers.

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About the Author

Stockhound

Premium Member

6 comments

djpreston

6th Feb '10

Ah good old Montier...

1. 5 cents
2. 5 minutes
3. 47 days.

Stockhound

7th Feb '10

Apparently the best group of results from random test samples came from MIT students. But still only 50% got them right. DjP - those are the right answers, but you'd be amazed how many people answer at least one of the following 'instinctive' replies...

1. 10 cents
2. 100 minutes
3. 24 days

The idea is that the human brain is split into 2 sides - emotional/intuitive and rational/logical. The best investors are able to take the former out of the equation. The questions above are meant to show how adept you are at doing this. Problem is, the people who do get all 3 correct are often more susceptible to fall into self-defeating habits such as over-confidence, confirmatory bias and belief in their own capacity as an expert to outwit the market.

Quite instructive stuff.

salty64

7th Feb '10

So I am almost instinctive if that is possible, getting two and three correct. As to number one my brain didn't split, I neglected read the question properly.

doverbeach

7th Feb '10

It would be interesting to see which question was the most often answered incorrectly.

No-one with any grasp of maths / science would get the last one wrong, and it isn't really possible to misread it - you basically have to think about the currect problem - apart from the people who have no idea about exponential growth and just guessed.

The second one I would guess tends to be got wrong by people looking for short cuts by applying patterns - 5-5-5 => 100-100-100.

The first one just invites the instinctive $1.10 - $1 = 10 cents. It's not really a "misreading" just such an natural thing to do when you have 2 numbers and it is clear the problem involves subtraction. But it does mean that when the answer was achieved, the person didnt stop and check it made sense. Which is a pretty basic science step.

It's pretty depressing that only a half MIT students got them all right.

db <feeling at a loose end>

emptyend

7th Feb '10

In reply to doverbeach (post #4)

The second one I would guess tends to be got wrong by people looking for short cuts by applying patterns - 5-5-5 => 100-100-100.

That'll be the chartists scuppered then ;-)

nigelpm

8th Feb '10

haha, two and three were easy but also got number one wrong. Even when I added them back it "worked" in my brain as I was thinking too much about the subtraction and the bat being $1 not the bat being "$1 + 10c" - fascinating. any more of these?

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Stockhound

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