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| Format: | Preprint |
| Published: |
2024
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2410.08009 |
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| _version_ | 1866914387066880000 |
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| author | Vilar, Jose M. G. |
| author_facet | Vilar, Jose M. G. |
| contents | The efficient market hypothesis considers all available information already reflected in asset prices and limits the possibility of consistently achieving above-average returns by trading on publicly available data. We analyzed low dispersion prediction methods and their application to the M6 financial forecasting competition. Predictive averages and regression to the trend offer slight but potentially consistent advantages over the reference indexes. We put these results in the context of high variability approaches, which, if not accompanied by high information content, are bound to underperform the benchmark index as they are prone to overfit the past. In general, predicting the expected values under high uncertainty conditions, such as those assumed by the efficient market hypothesis, is more effective on average than trying to predict actual values. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2410_08009 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Quasi-average predictions and regression to the trend: an application the M6 financial forecasting competition Vilar, Jose M. G. Applications The efficient market hypothesis considers all available information already reflected in asset prices and limits the possibility of consistently achieving above-average returns by trading on publicly available data. We analyzed low dispersion prediction methods and their application to the M6 financial forecasting competition. Predictive averages and regression to the trend offer slight but potentially consistent advantages over the reference indexes. We put these results in the context of high variability approaches, which, if not accompanied by high information content, are bound to underperform the benchmark index as they are prone to overfit the past. In general, predicting the expected values under high uncertainty conditions, such as those assumed by the efficient market hypothesis, is more effective on average than trying to predict actual values. |
| title | Quasi-average predictions and regression to the trend: an application the M6 financial forecasting competition |
| topic | Applications |
| url | https://arxiv.org/abs/2410.08009 |