Figure 1. Observed (red) and predicted (black) S&P 500. The leg from March 2009 (bottom point of the curve) was also predicted as a straigt line continuing the black portion. Considering the 6-month horizon of the prediction and the time when it was done (near the bottom of S&P 500), so far the prediction is accurate, but likely we have to calibrate it a bit down because the change in the number of 9-year-olds is overestimated for 2008 through 2010. In any case, we expect another nine months of growth. And the level of 1200 to 1300 by the end of 2009.
Figure 2. Observed and predicted 12-month returns of S&P 500. The model linking S&P 500 to the number of 9-year-olds and real GDP is described in our article and previous posts.
We will continue comparing our prediction and actual S&P 500 and presenting update figures.
As to the paper mentioned in the beginning, these people will never be convinced that they do not understand how the economy and financial market work. It is against their interests.