What if Investing Were Run Like March Madness?

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Filling out your March Madness bracket provides insight into how investors select assets, structure portfolios, and react during volatile market periods.

Starting last Thursday, March 17, our attention turned from stocks, oil prices, bond yields, and gold to March Madness and how well our predictions will hold up for the 67 college basketball games that will decide the next NCAA championship. For the next couple of weeks, discussions about how far Saint Peters can advance or is this finally Gonzaga’s year will take precedence over guessing what the Fed might do next.

For college basketball fans, this is March Madness. The widespread popularity of the NCAA March Madness tournament is not just about the games, schools, and players, but predictions and brackets. Brackets refer to the pools that many people participate in. Guess the most games correctly in your pool, and you earn bragging rights. You may also win your friends’ or colleagues’ cash.

Answer the following question: When filling out a March Madness bracket, do you:

1. Start by predicting the expected national champion and then work backward and fill out the individual games and rounds to meet that expectation?

2. Analyze each opening-round matchup, picking winners, and then repeat the process with your expected future round matchups until you arrive at your prediction of the champion?