Forecast Fails

As a user of the (excellent) Bloomberg data terminals at work, I am by default a recipient of the (generally crappy) Bloomberg Markets magazine. I usually keep them on hand for when I have been thinking too hard and need to read something inane while my brain reboots.

This month’s edition had an article titled “The World’s Best Financial Stock Pickers” which detailed the sell-side analysts – complete with awkward, contrived photographs – who had the best record calling financial stocks since January 2009.

The best team was Citigroup, who “made 26 accurate calls on the 43 financial stocks they follow”. 60 percent. That was the best of 212 firms - not very impressive. Despite having a section on “How We Crunched the Numbers”, the authors were not clear on what constituted a correct call in their methodology. This is unfortunate because it does not allow us to determine whether flipping a coin is more accurate than all that analysis. That being said, this gem implies that maybe the Citi team was better than the 60% implies: “on average, the 212 firms ... got 1.3 stock recommendations correct out of every 16”. I don’t know if that’s a typo, but it sure makes me sceptical of the next bounce I see off of an analyst upgrade.


Note: As an aside, there a few members of my organization who consider Bloomberg Markets to be more insightful than much higher-quality publications such as The Economist. Such a conviction is generally an excellent indicator of the intellectual capacity of its possessor.