Most Stock Market Predictions are Useless — Unless You’re a Superforecaster

There is a formula for making smarter predictions

Stephen Foerster
9 min readSep 17, 2021

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A hand is holding a crystal ball.
Photo by Drew Beamer on Unsplash

A few days before the tech bubble burst in March 2000 after the Nasdaq index reached an all-time high of 5,048, Jeremy Siegel — author of the best-selling book, Stocks for the Long-Run — wrote an op-ed for the Wall Street Journal. The provocative headline was “Big-Cap Tech Stocks Are a Sucker Bet.” He claimed that high valuations of tech stocks weren’t justified based on historical price-to-earnings ratios. He concluded, “Despite our buoyant view of the future, this is no time for investors to discard the lessons from the past.”

A few days before, Siegel had appeared on CNN’s Moneyline, as Stuart Varney’s guest. Asked to conclude whether the tech market was in a bubble, Siegel replied “I think we are going to see some very big declines in the sector this year.” A year later, Yahoo!’s stock price would be down by 92 percent. Two and a half years later, the tech-heavy Nasdaq index would see a decline of over 75 percent, and it wouldn’t be until 2015 before the Nasdaq index would again reach 5,000. Varney would later claim that Siegel was the person who called the market top.

Sounds like a great story on stock market predictions, doesn’t it? The Wizard of Wharton was able to predict the future! But what was Siegel’s take — how did he do it? We asked him that question when Andrew Lo (MIT’s Sloan School) and I interviewed Siegel for our book, In Pursuit of the Perfect Portfolio. Sigel’s response surprised us: “It was damn luck. I don’t think I knew it was a peak.”

If the person known for one of the best-ever stock market predictions attributes his call to luck, it begs the question of whether anyone can reliably predict the stock market, or anything else in the future for that matter. It isn’t easy. However, some research suggests that a group of “superforecasters” share characteristics that lead to more reliable forecasts in general. We’ll take a look at what those characteristics are and how you too can become a superforecaster — in everything from stock market predictions to fantasy football. But first, some context for stock market predictions.

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Stephen Foerster

I’m a Finance prof, CFA, and author of In Pursuit of the Perfect Portfolio (with Andrew Lo). I write stories about investing. (I don’t give financial advice.)