Causality law has it that if we know the present, then we can predict the future. Be aware: In this formulation, it is not the consequence but the premise that is false. As a matter of principle, we cannot know all determining elements of the present. - Heisenberg
One of the key problems with financial forecasting is that it has low explanatory power. The R-squared of most regressions are very low, less than 10%; consequently, we will not know what are the factors that truly drive returns. We may attribute causality to a news story from the day but that does not mean it is the return driver. We may falsely see correlation as causality.
Beware of the current unknown.
One of the key problems with financial forecasting is that it has low explanatory power. The R-squared of most regressions are very low, less than 10%; consequently, we will not know what are the factors that truly drive returns. We may attribute causality to a news story from the day but that does not mean it is the return driver. We may falsely see correlation as causality.
Beware of the current unknown.
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