Fantasy football management is purely an optimisation strategy
Steve Mills delivers insights into common behavioural finance mistakes in fantasy football and online poker
The Actuarial Network at Cass (TANC) welcomed Steve Mills from the FSA for a presentation of the typical mistakes made by fantasy football managers and online poker players.He demonstrated that many of these mistakes were mirrored in the financial world and that they were all rooted in behavioural finance theory.
Opening the evening, Mills stressed that the theory he was about to discuss was relevant to small fantasy leagues where managers had to buy players at auction at the beginning of the season, hence one player could only play for one team within the fantasy league.
'If you want to know how to win the type of fantasy leagues in the newspapers,' he said, 'it's pure optimisation strategy!'
Following on, Mills demonstrated how fantasy football managers demonstrated 'home bias' by sticking with established Premier League players, in the same way as investors were averse to overseas equities.
Other examples included 'regret aversion', where fantasy football managers stayed with tried and tested players despite worsening results, a strategy displayed in finance where institutions might stick with their existing strategies 'just in case.' If markets recovered after a hedge had been put in place, 'the hedge would make a loss and we would get the blame.'
Other behavioural finance traits such as optimism, anchoring and adjustment and the gambler's fallacy were explained with examples from online poker hands in an engaging presentation delivered to a packed auditorium.
Ketan Chandaria Chair of TANC said "I found the talk informative and thought provoking. I could relate to a number of the behaviours (especially the anchoring/adjustments, optimism and hindsight bias, in fact all of them!) and they were very well explained with an example each from football and poker, and a further few from what actuaries could be typically guilty of while at work . I hope this leaves me better placed and more likely to make proper rational financial decisions both personally and professionally."
TANC is a special interest group aimed at Actuarial Alumni of Cass Business School & City University.