Stock Market Predictions
One website that I particularly enjoy reading is FiveThirtyEight.com. It is run by Nate Silver, a freak statistician that applies his considerable numbers genius (normally applied to baseball) to politics. He’s probably biased to the left, but he also always discloses his methodologies in an open and clear manner. In the following article he muses about the predictability of the stock market (motivated by its use to credit or discredit the current president).
http://www.fivethirtyeight.com/2009/03/manic-depressive-market.html
In essence, the norm used to be that if the market rose on any day, it was more likely to rise the next day too as the rally played out. That effect was mostly canceled out in the 80s and 90s as information was relayed and used at a faster clip.
In a completely boggling twist, Nate’s data shows that since 2000, the market is has a tendency toward inverse serial correlation. This means that if the market rises one day, it is more likely to fall the next. He puts out a few reasons for why this might be, but at least we now have proof that the roller coaster ride that those of us who follow the market feel like we have been on isn’t just a figment of our imagination.
I guess this makes the market analagous to Kentucky’s weather. If you don’t like what is going on at the moment, just wait it out until tomorrow.
