Question

‏Research indicates that stock market forecasters are also overconfident. do they learn from their mistakes ? discuss

Answer 1

When we are discussing about overconfidenceit means the tendancy of investors to overestimate their knowledge about, financial markets and it is the application of the knowledge which can lead to unrealistic situations regarding the financial decisions. It includes holding the risky portfolios by the overconfident of the forecastors. Actually it is possible to forecast the market and the trends and tendency of the market upto a level. Beyond that point we can not predict the market. So there will be many unpredictable matters and there is always chance of uncertainity in the market. So that is not with in our hands and we are not able to control that kind of situations. The only thing we can do is predicting the future trends with the use of previous statistical data.

There are certain reasons are playing behind this overconfidence. one of them is the particular method is considered as a basis and we believe that this method have the ability to predict the future. So it is the predictive power of the method. They have the strong belief in this method of prediction and if there is no uncertainilty and of all variables taken are accurate the most probably these method will show the exact market situation in the future. With this method predictiveness the data analysis and their particular market knowledge will combine together. So this will make forcasters to stick with their decision always. Because of this reason at most time they are not willing to study new things from their mistakes.They will consider it as uncertainity. So they will not try to rectify the previous errors all the time. Forcasting is always have done by proper statistical data analysis so that it is very difficult to change these method once. This is the reason why they are sticking with their decision always.

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