Investors suffer from the perfect storm of collective amnesia and cognitive dissonance when it comes to evaluating the predictions of self-styled stock market gurus. It’s disturbing that these predictions are so casually made by people who know they will have a negative impact on many who follow them. They engage in this charade to keep their names in the news in an attempt to burnish their fortune-telling credentials and generate assets.The CXO Advisory Group performs a great service to investors by keeping track of the accuracy of stock market predictions. You can find their analysis here. They conclude these experts are right around 50 percent of the time, which is just about what you could expect by flipping a coin. There is no peer-reviewed data indicating that anyone has demonstrable skill (as opposed to luck) in predicting the direction of the markets.
The financial services industry is never at a shortage of ‘experts’ to predict where the market is going. Unfortunately for investors the track record of these ‘experts’ is no better than a flip of a coin.
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