The M6 Financial Forecasting Competition

The efficient market hypothesis (EMH) posits that share prices reflect all relevant information, which implies that consistent outperformance of the market is not feasible. The EMH is supported by empirical evidence, including the yearly “Active/Passive Barometer” Morningstar study which regularly finds that active, professional investment managers do not beat, on average, random stock selections. On the other hand, legendary investors like Warren Buffett, Peter Lynch and George Soros, among others, as well as celebrated firms including Blackstone, Bridgewater Associates, Renaissance Technologies, DE Shaw and many others have achieved phenomenal results over long periods of time, amassing returns impossible to justify by mere chance, and casting doubts about the validity of the EMH. It is the express purpose of the M6 competition to empirically investigate this paradox and to shed new light on the EMH by explaining the poor performance of active funds, as well as the exceptional performance of the likes of Warren Buffet, whose fund has achieved an average annual return of 20.0% since 1965, almost double that of S&P500’s 10.2% annual gain during that period.

The M6 competition will determine if above average financial returns are achieved by one or a combination of the following factors:

  • The ability to accurately forecast overall market returns, or those of individual stocks/ETFs.
  • The ability to properly model market or individual stocks/ETF uncertainty.
  • The ability to combine forecast accuracy and uncertainty with (portfolio) investment decisions when investing in various stocks and ETFs.
  • The ability to use judgement when forecasting and investing in order to “beat” the market.
  • The importance of a consistent investment strategy.
  • The importance of other factors, including judgmental and model-based prediction and investment decision biases and inefficiencies that can be exploited to achieve above average returns, for example.


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