Some Thoughts on the Value of Forecasting

Connelly, Thomas J.
April 1996
Journal of Financial Planning;Apr96, Vol. 9 Issue 2, p24
Academic Journal
This article highlights the importance of forecasting for financial planners. Planning ahead means making forecasts, and all financial require the planners to forecast or make assumptions about what values expect for various investment market and macroeconomic variables. Portfolio management, based on top down analysis, typically requires estimates for a wide range of macroeconomic variables, as does a strategy based on timing of business cycles. Bottom-up analysis and passive portfolio management have more subdued forecasting needs. Ultimately, all investment strategies depend, either implicitly or explicitly, on forecasts about the future investment environment. The forecasting needs of portfolio managers are largely dependent on their philosophy and style of management. To meet investor objectives at acceptable levels of risk and maintain a competitive advantage, portfolio managers and financial planners require consistently accurate and timely assessments of future economic activity.


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