Link: Paradox in Game Theory: Losing Strategy That Wins

NYT: Call it the Parrando's paradox, a law which states that two games guaranteed to make a player lose all his money will generate a winning streak if played alternately. It may explain phenomena in many fields: biology, politics, economy and investing.

Economists are studying Parrando's paradox to help find the best strategies for managing investments. Dr. Sergei Maslov, a physicist at Brookhaven National Laboratory in Upton, N.Y., recently showed that if an investor simultaneously shared capital between two losing stock portfolios, capital would increase rather than decrease.

"It's mind-boggling," Dr. Maslov said.

"You can turn two minuses into a plus." But so far, he said, it is too early to apply his model to the real stock market because of its complexity.