The results are in and they are bad. After tracking 68 experts and 6,582 market forecasts, CXO Advisory Group has concluded that the average market prediction offered by experts has been below 50% accuracy. Flip a coin and your odds for predicting the market are better.
It’s hard to imagine that the average market expert isn’t able to at least match the track record of a coin flip, but it’s true. Figure 1 has, by name, the relative performance accuracy of every guru that CXO Guru Grades has tracked.
Source: CXO Advisory Group
From 2005 through 2012, CXO collected 6,582 forecasts for the U.S. stock market offered publicly by 68 experts, bulls and bears employing technical, fundamental and sentiment indicators. Collected forecasts also included those in CXO’s archives. The oldest forecast in the sample is from the end of 1998.
The selected public records are sometimes found on the web sites of the gurus themselves and sometimes on web sites of other parties (for example, the business media). Especially for the former, CXO looked for archives that are clearly dated and not retrospectively filtered to avoid cherry-picking.
Some of the gurus dropped out of the race along the way and their records stopped at their last prediction. Other gurus sited reasons for their lackluster performances. For a compilation of general objections and defenses made by the guru’s under scrutiny, see The Demon’s Defense.
This January 2014 report marks the final tally of CXO Guru Grade project. Proprietor Steve LeCompte doesn’t see a practical reason for continuing the study. The point about inaccurate market forecasts as shown again, and again, and again.