M6 forecasting competition: The Ten Hypotheses / Predictions

  • Spyros Makridakis (University of Nicosia), Anil Gaba (INSEAD), Ross Hollyman (University of Bath), Fotios Petropoulos (University of Bath), Evangelos Spiliotis (NTUA), Norman Swanson (Rutgers University)
  1. The efficient market hypothesis will hold for the great majority of teams but this will not be the case for the top-performing ones.
  2. Team rankings based on information ratios will be different from rankings based on portfolio returns or rankings based on the volatility of portfolio returns.
  3. There will be a weak link between the ability of teams to accurately forecast individual rankings of assets and risk adjusted returns on investment. The magnitude of this link will increase in tandem with team rankings, on average. Additionally, team portfolios will in general be more concentrated and risky than can be theoretically justified given the accuracy of their forecasts.
  4. Top performing teams in the investment challenge will build their portfolios using assets that they can forecast more accurately.
  5. Teams will be measurably overconfident in the accuracy of their forecasts, on average. Namely, forecasts will be less dispersed and have smaller variance than observed in the data.
  6. There will be a small group of participants that clearly outperform the average both in terms of forecast accuracy and portfolio returns.
  7. Averaging forecast rankings (investment weights) across all teams for each asset will yield rankings (weights) that outperform those of the majority of the teams, except in cases where the very worst teams are removed from the average.
  8. Teams that employ consistent strategies throughout the competition will perform better than those that change their strategies significantly from one submission point to another.
  9. Submissions based on pure judgment or that rely heavily on judgment will perform worse than those based on data-driven methods, on average.
  10. The top-performing teams in the forecasting challenge will employ more sophisticated methods compared to the top-performing teams in the investment challenge.