Re: Prospects vs Forecasts.

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

Quoth Harry Veeder,

>A good investment rests primarily one good prospects, not on
>good income forecasts.

How can you assess prospect without the form of
continuity that you seem to be throwing out the window
as soon as true uncertainty is recognised.  If there is
no correlation between current conditions and future conditions,
there is no reason to invest in something based on its prospects.
The lack of correlation would imply that a random guess would
have as good (and as bad) result.

>Like oil, returns will flow in only if a supply of money
>is present, in other words if there is a market for that
>company's product.

So your forecast is a projection of the present into the
future.

Now obviously the further into the future you project,
the less credence you give the projection.  At some point,
you would give no credence whatsoever, and say, "I'll
manage through to that point, and as it gets closer, I
will take another look at conditions."

Which is the sensible way to behave when there is continuity
but the process is still non-ergodic (refer again to that
prior reference, Rosen, Anticipatory Systems Theory).
Or, using different language for the same epistomology,
(after all, in a Bayesian or MaxEnt approach statistics is
about how we know about the world, not about how the world is,
is with the frequentists), we treat it as if the variance is
bounded for near term event, but beyond a certain point is
unbounded.



--
Dr. Bruce R. McFarling, PhD
Bus. Office 1.72 -- (02) 4348-4078
School of Business
Faculty of the Central Coast
Newcastle University, Ourimbah