Of Human Bondage and Mental Reach in Financial Forecasting
One way or another, financial forecasting is an integral part of investment planning. Whether an outlook happens to be an explicit forecast or a vague impression, the investor has to envision the outcome downrange in order to make an intelligent decision today.
In a global market that grows ever more complex, an entire industry has sprung up to size up the prospects for assets ranging from stocks and bonds to commodities and properties. On the downside, the purveyors of forecasts have a lousy record of foretelling the market. For instance, the gurus as a group make calls that are worse than random guesses on the direction of the stock market. Remarkably, even the top tier of renowned pundits cannot match the performance of a coin toss in predicting the bourse.
On the upside, though, the market displays a variety of patterns which can help the investor in forecasting prices and managing portfolios. Admittedly, the power to predict the market is far from perfect. Even so, a limited ability to anticipate the movement of prices is far better than none at all.
A series of incisive studies by level-headed researchers has shed some light on the chaotic domain of financial markets. The findings provide a better grasp of the forces at work as well as the modes of behavior and the limits to forecasting. To a greater or lesser degree, financial prediction lies within reach for investors with little or no money to spare for oracles, and scarcely any time to devote to the task.
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