Reply To: Didier Sornette and the King Effect


As far as I can tell, he did not predict any booms and busts. He constructed a model of the U.S. stock market using the data of the past. (According to his c.v., he didn’t take a position in financial until 2006 and the first paper on the stock market he lists is from 2004.) The model generates signals to buy and sell. His model gave a sell signal in the U.S. stock market late in May. Since then the stock market has corrected downward. In other words, his predictive model is just another technical analysis of the stock market. It is not a theory of the business cycle or based on a theory of the business cycle.

Here is his c.v.:

ABCT does not stipulate the practical manner in which people make forecasts. They could have visions or use technical analysis or fundamental analysis or any other method they deem worthy. But, whatever method they choose, it must generate superior results otherwise its practitioners will be eclipsed by those who adopt superior techniques.