Excess Returns: Episode 8: Perils of Market Forecasting

We have just completed market prediction season. It’s the time of year where there are countless forecasts about what the economy will do in the new year. Its when experts tell you what interest rates will do for the year. And most of all, its when you see a variety of predictions for where the S&P 500 is heading this year. The experts making these predictions even do you the favor of giving you exact price targets so you know exactly what will happen. But there will be one major problem with almost all of these predictions: they will be wrong.

In this episode, we discuss:

  • Why market forecasts are wrong far more often than they are right
  • Why predicting a return close to the long-term average each year may be safe, but is rarely correct.
  • Why you should never listen to permabears

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Jack’s article on the Perils of Market Forecasts

Lessons from Jim O’Shaughnessy

Reacting to “Doom and Gloom” Stock Forecasts May Cost You

Can We Improve Predictions? Q&A with Philip “Superforecasting” Tetlock