Forecasting Market Future

April 13, 2010 Andrew Gelman

McKinsey had a great chart today:

To explain the chart – the green are the predictions for the next year at various times in the past. The blue is the truth that eventually comes along. So, the predictions do tend towards the truth as time goes on.

They’re consistently optimistic – but does the data justify a more sophisticated model? Or is the design of markets inherently biased towards rewarding optimists more than realists?

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About Andrew Gelman 26 Articles

Affiliation: Columbia University

Andrew Gelman is a professor of statistics and political science and director of the Applied Statistics Center at Columbia University. He has received the Outstanding Statistical Application award from the American Statistical Association, the award for best article published in the American Political Science Review, and the Council of Presidents of Statistical Societies award for outstanding contributions by a person under the age of 40.

His books include Bayesian Data Analysis (with John Carlin, Hal Stern, and Don Rubin), Teaching Statistics: A Bag of Tricks (with Deb Nolan), Data Analysis Using Regression and Multilevel/Hierarchical Models (with Jennifer Hill), and, most recently, Red State, Blue State, Rich State, Poor State: Why Americans Vote the Way They Do (with David Park, Boris Shor, Joe Bafumi, and Jeronimo Cortina).

Andrew has done research on a wide range of topics, including: why it is rational to vote; why campaign polls are so variable when elections are so predictable; why redistricting is good for democracy; reversals of death sentences; police stops in New York City, the statistical challenges of estimating small effects; the probability that your vote will be decisive; seats and votes in Congress; social network structure; arsenic in Bangladesh; radon in your basement; toxicology; medical imaging; and methods in surveys, experimental design, statistical inference, computation, and graphics.

Visit: Andrew Gelman's Website

Forecasting Market Future

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