A new study confirms market forecasting is a difficult game. The study, Overprecision in the Survey of Professional Forecasters, looked at 16,559 economic forecasts made since 1968.
It found experts had 53 per cent confidence in their accuracy but were only correct 23 per cent of the time. Worse, it found when forecasters were 100 per cent confident in their forecast, they were right only two-thirds of the time.
These were well-trained, experienced forecasters who received regular feedback. It’s wise to assume the gulf between confidence and accuracy would be much bigger among ordinary investors.
Commenting on the study, fund manager and Behavioural Investment blogger Joe Wiggins suggests we remember we will often be wrong, prepare for a wide range of outcomes, and “stop having views on everything” – advice that should be heeded by investors and non-investors alike.
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