TY - JOUR
T1 - The M6 forecasting competition
T2 - Bridging the gap between forecasting and investment decisions
AU - Makridakis, Spyros
AU - Spiliotis, Evangelos
AU - Hollyman, Ross
AU - Petropoulos, Fotios
AU - Swanson, Norman
AU - Gaba, Anil
N1 - Publisher Copyright:
© 2024 The Author(s)
PY - 2024
Y1 - 2024
N2 - The M6 forecasting competition, the sixth in the Makridakis competition sequence, focused on financial forecasting. A key objective of the M6 competition was to contribute to the debate surrounding the Efficient Market Hypothesis by examining how and why market participants make investment decisions. To address these objectives, the M6 competition investigated forecasting accuracy and investment performance in a universe of 100 publicly traded assets. The competition employed live evaluation on real data across multiple periods, a cross-sectional setting where participants predicted asset performance relative to that of other assets, and a direct evaluation of the utility of forecasts. In this way, we were able to measure the benefits of accurate forecasting and assess the importance of forecasting when making investment decisions. Our findings highlight the challenges that participants faced when attempting to accurately forecast the relative performance of assets, the great difficulty associated with trying to consistently outperform the market, the limited connection between submitted forecasts and investment decisions, the value added by information exchange and the “wisdom of crowds”, and the value of utilizing risk models when attempting to connect prediction and investing decisions.
AB - The M6 forecasting competition, the sixth in the Makridakis competition sequence, focused on financial forecasting. A key objective of the M6 competition was to contribute to the debate surrounding the Efficient Market Hypothesis by examining how and why market participants make investment decisions. To address these objectives, the M6 competition investigated forecasting accuracy and investment performance in a universe of 100 publicly traded assets. The competition employed live evaluation on real data across multiple periods, a cross-sectional setting where participants predicted asset performance relative to that of other assets, and a direct evaluation of the utility of forecasts. In this way, we were able to measure the benefits of accurate forecasting and assess the importance of forecasting when making investment decisions. Our findings highlight the challenges that participants faced when attempting to accurately forecast the relative performance of assets, the great difficulty associated with trying to consistently outperform the market, the limited connection between submitted forecasts and investment decisions, the value added by information exchange and the “wisdom of crowds”, and the value of utilizing risk models when attempting to connect prediction and investing decisions.
KW - Assets
KW - Forecast accuracy
KW - Forecasting competitions
KW - Investment decisions
KW - M competitions
UR - http://www.scopus.com/inward/record.url?scp=85210763276&partnerID=8YFLogxK
U2 - 10.1016/j.ijforecast.2024.11.002
DO - 10.1016/j.ijforecast.2024.11.002
M3 - Article
AN - SCOPUS:85210763276
SN - 0169-2070
JO - International Journal of Forecasting
JF - International Journal of Forecasting
ER -