What do fortunetellers, psychics, and stock market forecasters have in common? They all claim to know what happens next…for a price.
But how good are they? Horrible! Yet some investors pay for it anyways. It’s a lesson investors can learn from history.
Alfred Cowles was one of the first to put market forecasters to the test almost a century ago. He conducted two studies, the first in 1932 and again in 1944.
The first study was based on the period from 1928 to 1932. Cowles first looked at how successful 20 insurance companies and 16 financial services were at picking stocks that would outperform the market. He next looked at the accuracy of 25 financial publications in predicting the movements of the markets. He also included the 26-year record of the editor of the Wall Street Journal, Peter William Hamilton.
The results were not surprising. Continue Reading…