Forecast

A forecast is a statement of expected future occurrences such as events or trends. Investopedia defines forecasting as "a technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends." A business forecast is management's best estimate of what will happen during the forecast period.

Characteristics of excellent forecasters according to data from the Good Judgment Project

Superforecasting: The Art and Science of Prediction is a 2016 book about forecasting written by Philip E. Tetlock and Dan Gardner.

The book reports on a wealth of data coming from the The Good Judgment Project (started in 2011) which indicates that well-chosen selected amateur forecasters who demonstrate their ability to accurately forecast are often more accurate than subject matter experts.

Characteristics of "superforecasters":

- Temperament: Cautious (Many things are uncertain), Humble (Reality is infinitely complex), Non-Determinist.

- Cognition: Open-Minded (Beliefs are hypotheses to be tested, not treasures to be protected), Intelligent, Curious (Intellectually curious, enjoy puzzles and mental challenges), Reflective (Introspective and self-critical), Numerate.

- Analytical: Pragmatic (Not wedded to any idea or agenda), Dragonfly-Eyed (Value diverse views and synthesize them into your own), Probabilistic, Thoughtful Updaters (When facts change, they change their minds), Intuitive Psychologist Intuitive (Aware of the value of checking thinking for cognitive biases and emotional biases)

- Work Ethic: Growth Mindset, Grit (Determined to keep at it however long it takes)

The Good Judgment Project (started in 2011) indicates that well-chosen selected amateur forecasters who demonstrated their ability to accurately forecast are often more accurate than subject matter experts.

The mind of a superforecaster

The 'not much faith in fate or luck' would seemingly contradict the hypothesis that political betting markets are more reliable than opinion polling.

Mindset of superforecasters

• Superforecasting: The Art & Science of Prediction – Summary
• Sharpening Your Forecasting Skills, Credit Suisse's overview of the Good Judgment Project's research and the work of Philip E. Tetlock
• Ten Commandments for Aspiring Superforecasters
• Superforecasters’ Toolbox: Beliefs as Hypotheses, Good Judgment Project website

Weather forecasting

Weather forecasting includes the use of objective models based on certain atmospheric parameters, along with the skill and experience of a meteorologist to forecast the expected weather.

Political forecasting

• Public opinion poll

Video on political forecasting

• Expert Political Judgment: How Good Is It? How Can We Know? | Philip Tetlock

Book related to political forecasting

• Expert Political Judgment: How Good Is It? How Can We Know? by Philip E. Tetlock, Princeton University Press; New Ed edition (August 20, 2006).

Economic forecasting and economic recessions/depressions

See also: Economic forecasting and Economics

According to Investopedia, "Economic forecasting is the process of attempting to predict the future condition of the economy using a combination of important and widely followed indicators."

Economic Forecasting: Definition, Use of Indicators, and Example

• Economic Forecasting: Definition, Use of Indicators, and Example, Investopedia

Inverted yield curves and upcoming recessions

• What You Need to Know About the Inverted Yield Curve

• US Treasury yield curve

Volatility Index (VIX)

• The Volatility Index, or VIX, measures volatility in the stock market. When the VIX is low, volatility is low. When the VIX is high volatility is high, which is usually accompanied by market fear.

The Chicago Board of Options Exchange (CBOE) creates and tracks an index know as the Volatility Index (VIX), which is based on the implied volatility of S&P 500 Index options.

• The Vix Index - Investopedia - The VIX is used as a contrary market indicator, how institutional sentiment can be measured by VIX, and why an understanding of the VIX tends to favor long and short puts.

Key takeaways about the Volatility Index (VIX):

• The Volatility Index, or VIX, measures volatility in the stock market.
• When the VIX is low, volatility is low. When the VIX is high volatility is high, which is usually accompanied by market fear.
• Buying when the VIX is high and selling when it is low is a strategy, but one that needs to be considered against other factors and indicators.

Tools and tips:

• VIX Chart

• Determining market direction with VIX

The relationship between the stock market and the economy

What’s the relationship between the stock market and the economy? - "There has never been a consistent relationship between the stock market and the economy. While the two tend to loosely move in the same direction, they often act in widely different ways – particularly over shorter time periods... The stock market is forward looking. The price you are willing to pay for a stock today is based on how well you and other investors expect the company to do in the future. By contrast, some economic data looks back at what has already happened."

Books

• Superforecasting: The Art and Science of Prediction by Dan Gardner and Philip E. Tetlock, Crown (September 13, 2016)

External links

• Forecasting: What It Is, How It’s Used in Business and Investing
• How to Choose the Right Forecasting Technique, Harvard Business Review