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Theoritically, there exists a model that predicts all future stock prices EXACTLY at any given time in the future, as long as the results are completely isolate
by ComradePhil 5y ago
Theoritically, there exists a model that predicts all future stock prices EXACTLY at any given time in the future, as long as the results are completely isolated from all market participants (i.e. the knowledge of the result is COMPLETELY isolated from the market). Here is how you can theoritically prove it exists:
Train a model today so that it is overfitting for a given stock. It would predict everything very accurately upto today. The ONLY way to make sure that the results are completely isolated from the market is to not make the result available to ANYONE (how do you know that an isolated human observer is not leaking data with some unknown phenomena... say quantum entanglement with particles in other people's brains, for example). So, the ONLY way to test the models is back-testing.
You can extend that to saying that for any given point in the future (say, this is a reference point), there will be an overtrained model which will backtest perfectly i.e. the theoritical model that works at any time during the past to predict the exact stock price in the future upto the point of reference.