3 ms·
Saying that it's a cycle implies you can time downward trends like crashes or predict their intensity, which, anyone in finance or maroeconomics will tell you i
by krona 9y ago
Saying that it's a cycle implies you can time downward trends like crashes or predict their intensity, which, anyone in finance or maroeconomics will tell you is impossible
Just because something is hard doesn't mean it's impossible; You can predict anything with a degree of certainty. Then there are things like uncertainty and radical (Knightian) uncertainty.
Any chartered actuary would tell you the same if you could afford one, and they will know quite a bit about business cycles and how to model them, too.
- VHRanger 9y agoExcept you won't in macroeconomics. The simple problem in macroeconomics is lack of data -- history happened only once so you can't test counterfactuals. You can try to build a model, but the confidence intervals for the next big crash are going to be either useless (way too wide) or bullshit if what you're trying to predict is the next market crash. Building a classifier around it machine learning style will not fundamentally help, either. You can try it: here is an open source, serious, full scale macroeconomic model by the NY Fed [1]. Try to predict the next large crash with it and report back [1] https://github.com/FRBNY-DSGE/DSGE.jl https://github.com/FRBNY-DSGE/DSGE.jl
- neffy 9y agoThis would be the same macro-economic theory that even macro-economists will now grant is fundamentally flawed. The rest is left as an exercise to the reader.