"The Trouble With Track Records"
Allan Lichtman, an American University political scientist who claims an unbroken 7-for-7 record of correct presidential predictions says President Obama’s a shoe-in for re-election.
His method seems very suspect to me, but what’s interesting here is the track record. Seven out of seven is impressive! But how impressive? Well, if you guess totally at random you’ll only make seven correct calls in a row 0.78 percent of the time. That’s not very often. On the other hand, the American Political Science Association says it has 15,000 members which is consistent with over 100 people getting it right seven times in a row based on random guessing. Just a reminder that it’s a big world out there, so it’s never hard to find people who just happen to be on a lucky streak and are being accorded an undue level of credibility. Not a big deal when it afflicts the world of election forecasting, but a huge deal in terms of the world of finance especially because there’s basically almost no way to distinguish ex ante between someone who’s good and someone who’s lucky.