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“We really are bad at forecasting markets.”

“I am not breaking new ground when I say that most people are bad at forecasting financial markets. But just how bad they are has been the focus of an analysis by a group of researchers from Washington University. And their results have significant implications for portfolios.”

“Three surveys of three groups of people with different financial sophistication. What could possibly go wrong? A lot, as can be seen by a simple stat. None of the surveys even comes close in the long run to forecasting the actual return of equity markets. The long-term average market return is 8.9%, yet the average forecast return is less than half that at 3.8%! The average return of the CFO survey is 4.0% and the average return from the household surveys is 6.7%.”

Source: Joachim Klement

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