Here’s a question you may have wondered about: if meteorologists frequently provide five-day weather forecasts, how come market analysts (within reason) don’t do the same for the equities sector? Granted, human behavior can be irrational at times and black swan events by nature are unpredictable. However, on the whole, humans generally think in predictable manners.
At first glance, the problem should be easy to address. When forecasting weather, meteorologists utilize ensemble models, historical simulations and probability distributions. By converting the applications toward the equities space, market analysts can assess the three main factors that meteorologists use for the weather:
