Australian Economists Predictions No Better Than Flipping a Coin

[globaleconomicollaps]

"The Reserve Bank of Australia did some investigation into the accuracy of their economic predictions — the ones they use to run the country — with less than flattering results. '70 per cent of the RBA's forecasts for underlying inflation for the year ahead were close to the mark, but its predictions of economic growth were less accurate, and its unemployment rate estimates no better than [chance] ... The Reserve Bank employs numbers of people on very high pay and what they're admitting now is that their — all of this so-called science — has produced nothing more than what a roll of the dice could produce.'"

via slashdot
http://www.abc.net.au/news/2013-02-0...m-walk/4499098

[NCR85]

Re: Australian Economists Predictions No Better Than Flipping a Coin

In the same vein:
http://www.cxoadvisory.com/gurus/

Aggregate Grading Results
The following chart tracks the inception-to-date accuracy of all 6,459 graded forecasts in the sample. The extreme values early in the sample period relate to small cumulative samples. Terminal accuracy is 46.9%, an aggregate value very steady since the end of 2006. With respect to the gradual decline during 2003 through 2006:

• Grading judgment, as well as number of gurus and number of forecasts, may evolve with experience (becoming a little more strict).
• Individual guru samples may tend to have a lucky start, thereby attracting media attention or engendering self-confidence for publishing forecasts.

If we average by guru rather than across all forecasts, terminal accuracy is 47.4%.

[NCR85]

Re: Australian Economists Predictions No Better Than Flipping a Coin

Good article on the same topic:
http://advisorperspectives.com/dshor...redictions.php

The following charts, sourced from James Montier's incredibly useful book, Behavioural Investing (2007), show aggregate forecasts from Wall Street's most famous oracles through time, next to the actual trajectory of the forecast variable.Chart 1. Consensus bond yields forecasts 1 year out vs. actual

Chart 2. Consensus S&P500 level 1 year forecasts vs. actual

Chart 3. Consensus S&P500 aggregate earnings 1 year forecasts vs. actual

In all cases the analysts appear to do a noteworthy job of describing what just happened, but appear to have no vision whatsoever about what is about to happen next. This applies to interest rates, the level of stock indices, and aggregate earnings.

[radon]

Re: Australian Economists Predictions No Better Than Flipping a Coin

The problem is that if you have a truly prescient model everyone will put their money next to yours and it will have an effect on the market. Some smart guy needs to come up with an uncertainty principle for market analysis.