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Guru Stock Market Forecasting Accuracy Over Time

May 7, 2009 • Posted in Investing Expertise

A reader inquired whether the average accuracy rate for U.S. stock market forecasts at Guru Grades has been stable over time. The average accuracy rate is a cumulative (inception-to-date) calculation. To test its stability, we calculate the inception-to-date, equally-weighted average guru accuracy rates as of October 1 for each of the past four years (with 2008 not yet fully graded). Over this time, the database has expanded, with some gurus lapsing to inactivity and others being added, so the mix of active forecasters changes over time. Using all currently collected and graded forecasts, we find that:

The following chart summarizes the retrospective guru stock market forecasting accuracy rate for the past four years. Despite changes in individual guru forecasting activity and varying market conditions, the average forecasting accuracy rate is stable at just under 50%.

The current inception-to-date equally-weighted average Guru Grades accuracy rate is 48%.

In summary, limited evidence suggests that the stock market forecasting accuracy rate of a reasonably diversified group of experts is roughly stable over time at close to 50-50.

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