QuoteOriginally posted by: GamalThere are some downsides of prediction:1. Unlike pricing and risk management it's not scientific - there're no rules that everybody may learn: if there're winners, there must be loosers.2. You make money with good predictions, so you don't publish them - publishing good predictions is just giving away money. You may be hence sure that all published predictions are wrong.3. Maybe best brains in finance work on predictions, maybe not, but one thing is sure - they are solitary and all start from the very begining. As Jim Simons states - all trades are separated, there're tricks but not rules. There's no giants to stand on their shoulders. BTW - how to tell a good brain from a worse one? By brain teasers? So you may find best brains in brain teasers, nothing more. Good in making money is only someone who makes money, that's all. John Meriwether was until until...There's a central flaw and a paradox in what you said.If someone publishes a prediction method and (almost) no one believes it to be true, then that method will continue to make money for it's few believers. Ironically, the most unbelievable predictions may be the ones most likely to be true! It's only when enough people (or people with enough capital) believe and use a prediction method that it becomes falsified. In essence, widespread belief in your statement #2 makes your statement #2 false (and vice versa).Prediction can be scientific as long as the system boundary encompasses all of the elements that actually affect the predicted outcomes. Prediction methods that focus on prices as statistical closed-systems are deeply flawed from the reasons that you state but prediction methods that focus on the predictors may be more likely to work. Although a given prediction algorithm may have limited life due to the dynamics of your rule #2, the lifespan of prediction meta-algorithms can be much longer.Finally, there is a persistent class of winners in the system -- those that create the appearance of opportunities to win and attract people to "the game". The ecosystem of pundits, tool makers, brokers, and market makers seems to thrive day in, day out.
Last edited by Traden4Alpha
on September 25th, 2014, 10:00 pm, edited 1 time in total.