Banking

Forecasting Financial Market Annual Performance Measures: Further Evidence

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Executive Summary

Forecasting is simple; producing accurate forecasts is the essential task. Experience suggests that financial managers often assume that because models used in forecasting are appropriate that they are effective. This study addresses this assumption. Effective is taken to mean forecasts where the Absolute Percentage Error (APE) is equal to or less than 10%. It has been reported that forecasts of the CAPM-? using the Bloomberg heuristic did not provide effective forecasts. The authors were interested to determine if the lack of forecasting accuracy is peculiar to ? or is more pervasive.

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