Forecasting stock market prices: Lessons for forecasters

In recent years a variety of models which apparently forecast changes in stock market prices have been introduced. Some of these are summarised and interpreted. Nonlinear models are particularly discussed, with a switching regime, from forecastable to non-forecastable, the switch depending on volatility levels, relative earnings/price ratios, size of company, and calendar effects. There appear to be benefits from disaggregation and for searching for new causal variables. The possible lessons for forecasters are emphasised and the relevance for the Efficient Market Hypothesis is discussed.