Stock Market Predictions

Why stock market predictions are so often misses the?
What was the oracle in ancient times , which is now the expert. To find out what happens to the economy or the stock exchanges, we rely on the knowledge of modern prophets : On Financial Market researchers , analysts and fund managers – even on those who earn their money by watching the markets.

Success makes arrogant
But how accurate are the stock market predictions of the experts? Three researchers from Germany and wanted to know Canada and compared with the old estimates of future actual values.

Cause of their study are insights from psychology : " Most people are often over- confident and to the precision of their knowledge , "write Richard Deaves ( McMaster University, Ontario ), Erik Lueders and Michael Schröder (both: ZEW Mannheim) in their study, the forthcoming in the Journal of Economic Behavior & Organization "appears. But the same goes for professional financial prophet? This question has been no research team investigated.

For its test of reality , the three scientists used the forecasts on the future development of the German stock index ( DAX ), which are requested in the same questionnaire. The expert estimates of future economic development proved to be asked for the study as too crude – the ZEW only be a basic assessment of the development: Is it up , down, or is all the same?

The DAX forecasts on the other hand much more concrete : So the experts have to specify a precise margin, are the likely the stock after half a year in their opinion is .

Hardly a respondent is the test oracle
The interesting thing : The width of the margin to select the respondents themselves . An interval of 1000 Dax – points is just as possible as one of ten. Who was more uncertain , then, how many points are in the index six months later, would , could simply indicate a greater margin – and thus in the end maybe even be right .

Nevertheless, a respondent could barely pass the test oracle : The vast majority of Dax true value was at most only seven out of ten estimates the assumed interval. 40 percent met even only a maximum of every second time the mark.

In a second study the researchers were able to demonstrate to the financial experts a typical human trait : to make success self-confidence , caution against failures . they were correct with their predictions in the previous time, then reduced the respondents the margin at the next attempt at about five percent.

they were wrong, they increased the interval by a similar amount – probably to the danger of a renewed insult reduced. The crucial question, the researchers went about was: experts with long experience better? "If they are able to learn from their successes and failures , they would have the time to make really accurate forecasts " , the researchers suspect .

But curiously, their analysis showed just the opposite : three additional years of professional experience, the forecasts deteriorate measured by an average of over one percent , noted the authors. Perhaps the motivation is to deliver good performance, with experienced veterans simply are not as big as the presumption of Deaves , Luders , and Schroder.

Experience therefore not protected against errors , but makes it more likely. Conversely, this means that true professionals do not have to be old.

For additional you can also read - Can You Dominate Your Retirement?

Stock market prediction is an arcane art mixed with the best of computer science. With the recent performance of the stock market and economy, it is something we all need to take seriously.

The papers, radio and TV all talk about how our personal investments have taken a beating. While things have recovered some recently, many investment portfolios have been hit very hard. Credit card balances have gone up and foreclosures have skyrocketed.

Pundits often admit that the economy has a significant influence on the stock market performance. Short term the market may be able to shake it off but in the long run profit, loss and cash flow will win out. Equilibrium can take a while to re-establish itself though.

Just remember as you listen to the prognosticators giving their latest stock market predictions that they don't have a crystal ball. Had you known what was going to happen in 2000, you would have avoided a large drop in your investment accounts. They are really just using fancy models to forecast the market's movements.

Their prediction is based on experiences, a model and sometimes just a gut feeling. Knowing what their stock market prediction is based on can help you understand if it is going to be useful for you. No one truly believes you can predict the future. those experienced in the trading pits can make very educated guesses though. They use tools like technical analysis based on the past price movements and trading volume to determine the probability of the market moving in one direction.

Can You Dominate Your Retirement?
Being able to look at technical analysis can give you an edge in the market. Even a small percentage over the long run can add thousands to your retirement income. People will often talk about bubbles and picking the top or bottom of one. Just remember one very important fact.

Bubbles always tend to last longer than people expect they will. Trying to guess the end of a bubble can be dangerous. Now one really knows if silver or oil will continue its price increase. Or if the economy will enter into a decent recovery or a double dip recession. Building a model allows us to get a decent idea of where things are likely to head though. Developing those models can be very difficult. They will often function very well for a short period of time and then deteriorate swiftly.

Many times that is enough to give you a decent edge. Commodities aren't the only thing in question. Many commodities have a direct influence in the stock market. Gold price can have a huge impact on a gold mining company's ability to make a profit. Those profits tend to dictate the share price of a stock. If you can generate increasing and steady profits, investors generally reward you with higher stock prices.

Make sure you study the model and understand what it is built upon. Make sense of their model before believing their conclusions. Stock market prediction can give you a distinct advantage in the market IF you find the right one. Pick the wrong one and you could be living in the paupers section of town.

For additional you can also read Is stock market prediction fact or fiction?

Is stock market prediction fact or fiction? Stock market prediction is mostly a fiction created by the big money people who sell dreams though it does exist in some forms.

That is truly a multi billion dollar question. People have been analyzing data for a long time trying to develop predictive measures of the stock market.

In most instances they develop something that gives them a slight edge for a while but eventually returns to the normal performance or in some cases presents very large drops as the model breaks down.

Notice I mentioned a model. Scientists develop a model that fits the actual performance to a mathematical equation. They take a set of data and try to determine what outside factors cause the market to rise or fall.

It is a very large business with billions of dollars at stake. Lehman Brothers went bankrupt when their statistical model didn’t match reality. It has happened before and I am sure it will happen again.

Stock market prediction is a business that goes through cycles. When things are stable, a model can be developed that matches the performance of the market. More and more people develop similar models until a large portion of the available money is all taking one side of the trade.

This creates an unsustainable condition that eventually takes a dramatic change for the worse. Once the market begins to change, the statistical models each company has developed breaks down. Some do so quickly which causes a cascading effect through the companies all running the same type model.

This dramatic shift causes a tidal wave to ripple through the companies. Suddenly trades have to be taken off in a very rapid fashion. Due to the large amount of money in these trades the market is not able to absorb them in a smooth and consistent fashion.

Since some of the models are built around using leverage to amp the returns, the effects are more prominently felt in those companies. They eventually reach equilibrium but cause chaos in the markets until things stabilize.

The stable periods are when models work effectively. They give a huge advantage to the company that develops an accurate model early on. They also can provide for a long period of time when outsized returns are possible.

The decades of 1980 and 1990 show the dramatic rises that can happen in stock market valuations. When fundamental and cyclical events line up to create a synergy, markets can rise dramatically and consistently.

The transition periods like 1964 to 1984 are when models tend to break down. Because the market isn’t stable it makes creating an accurate stock market prediction nearly impossible. Those transition periods (I guess two decades qualifies as a transition though it is a very long time) make stock market prediction a tough sport to play.

See Also : Should you Be in The Market Right Now?

Stock market prediction is an secret art joined with the best of computer science. With the recent performance of the stock market and economic performance, it is an idea we all need to take seriously.

The newspapers, radio and TV all review how our personal portfolios have taken a beating. While things have recovered some recently, many investment portfolios have been hit dramatically. Credit card balances have leaped and foreclosures have skyrocketed.

Talking heads often admit that the economy has an important influence on the stock market price. Short term the market may be able to shrug it off but in the long run profitability and cash flow will win out. Balance can take a while to re-establish itself though.

Just remember as you listen to the pundits providing their latest stock market predictions that they don’t have a crystal ball. Had you known what was going to occur in 2000, you would have escaped a large decline in your 401ks. They are really just using complex models to anticipate the market’s movements.

Should you Be in The Market Right Now?
Their prediction is based on experiences, a model and sometimes just a gut feeling. Knowing what their stock market prediction is based on can help you understand if it is going to be useful for you. No one truly believes you can predict the future. those experienced in the trading pits can make very educated guesses though. They use tools like technical analysis based on the past price movements and trading volume to determine the probability of the market moving in one direction.

Being able to look at technical analysis can give you an edge in the market. Even a small percentage over the long run can add thousands to your retirement income. People will often talk about bubbles and picking the top or bottom of one. Just remember one very important fact.

Bubbles always tend to last longer than people expect they will. Trying to guess the end of a bubble can be dangerous. Now one really knows if silver or oil will continue its price increase. Or if the economy will enter into a decent recovery or a double dip recession. Building a model allows us to get a decent idea of where things are likely to head though. Developing those models can be very difficult. They will often function very well for a short period of time and then deteriorate swiftly.

Many times that is enough to give you a decent edge. Commodities aren’t the only thing in question. Many commodities have a direct influence in the stock market. Gold price can have a huge impact on a gold mining company’s ability to make a profit. Those profits tend to dictate the share price of a stock. If you can generate increasing and steady profits, investors generally reward you with higher stock prices.

Make sure you study the model and understand what it is built upon. Make sense of their model before believing their conclusions. Stock market prediction can give you a distinct advantage in the market IF you find the right one. Pick the wrong one and you could be living in the paupers section of town.

You can find out a lot about Stock Market Prediction here. It contains the current prediction and a poll to let you participate as well. Discover what your friends think is going to happen. Join in the Stock Market Prediction party.

See also: Be trusted to stock market predictions..

We constantly hear predictions on what next for the stock market, house prices and much more (some of them are reported on the site). Here, TiM gives its a 30-second view on who you should trust...

So which predictions can you trust?
Be trusted to stock market predictions is very few. Many experts and pundits have a vested interest in talking a particular market up or down. Or sometimes it's nothing more than a sub-conscious bias.

Most fund managers, for instance, operate in a culture where stock markets are king. And we don't need to tell you that estate agents feel compelled talking up the property market (many of them honestly believe what they're telling you).

You may begin to notice the strange coincidence that many of stock market predictions are based on the recent average returns: an 'expert' in his field subconsciously knows what returns should be and merely applies it to the future.

So according to the FSA, the best guidance for stock market returns is around 6% or 7%. You'll therefore find that most of the FTSE 100 predictions for 2010 will suggest a rise from around 5,500 to around 5,900, which is a 7% rise.

There's some guilty parties here and even many readers are guilty of the same - see here.

Every year that I've covered stock market predictions, the most popular answer nearly every year is 7% up.

What about those who have made correct calls before?
Those are the ones that This is Money is most interested in. Our aim is to tell our readers when the world's most successful investors give their opinions - the likes of billionaires such as Warren Buffett or George Soros or fund managers with a proven track record of getting it right, such as Anthony Bolton or Neil Woodford.

The next most important views are from those who have made correct calls, but have no track record of performance to prove it. They deserve a little more caution. In this pack we'd include US economist Nouriel Roubini who saw the financial crisis of 2008 coming well in advance.

It's worth noting that Roubini has been warning the stock market rally would end from the moment it began in March 2008. He's been wrong so far, but may still be proved right.

So they've got it right once, but might not do so again?
That's bang on. Some market calls come right more by luck than judgement. The bottom line is that markets, by nature, are erratic and unpredictable. Nassim Taleb explains this well with his Black Swan Theory - a Black Swan event is when a rare, impossible to predict event occurs.

He has a book of the same name and another called Fooled by Randomness . That titles sums up the sort of cyncism all readers should arm themselves with when reading predictions on financial publications (including this one).

See also why stock market predictions are so often misses the...