Question

You have the following information about forecast error of different forecasting techniques:
Error for Technical: 15%
Error for Fundamental: 10%
Error for Market based: 5%

When you assign weight to each forecast method, which of the following weight schedule is correct

A. Weight for Technical: 50% Weight for Fundamental: 10% Weight for Market based: 40%
B. Weight for Technical: 10% Weight for Fundamental: 50% Weight for Market based: 60%
C. Weight for Technical: 20% Weight for Fundamental: 50% Weight for Market based: 30%
D. Weight for Technical: 20% Weight for Fundamental: 30% Weight for Market based: 50%

Answer 1

As the technical analysis is not much relevant in today's market, because today's markets are strongly efficient because of which fundamental analysis too won't help much however market-based analysis may provide some additional information which can be used to refine our fundamental analysis results. so highest weight should be given to market-based, second highest to fundamental and least weight to technical error the weights composition should be 20%, 30%, 50% i.e. option D