<p>I heard a lecturer saying predicting prices is easier than predicting fundamentals (eg. GDP). I assume that's because prices are usually non-stationary? Does nonstationarity makes series more predictable? If so, are price changes still easier to forecast than say GDP changes?</p>

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2022-11-14T17:41:10.500Z
Can you please define "*more predictable*" and "*easier to forecast*"?
Giskard
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2022-11-14T17:41:40.123Z
Also, if you think prices are non-stationary, why do you think GDP is stationary?
Giskard
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2022-11-15T13:57:51.933Z
@Giskard : In terms of minimizing MSE of the forecast. Yeah you are right I can't assume that.  I'm just trying to understand under what scenarios could this statement make more sense?
MXXX
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2022-11-16T17:36:30.390Z
Nonstationarity is more often than not an impediment to forecasting.
Richard Hardy
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2022-11-17T17:38:13.797Z
@RichardHardy Do you know of any good papers/textbooks explaining why this is the case?
MXXX
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2022-11-17T17:42:55.510Z
Not really. But the basic idea is fairly simple. It is harder to predict a process the future of which does not look like its past compared to one where the future does look like the past. Nonstationarity tends to make the future look different from the past, while stationarity per definition implies the opposite.
Richard Hardy
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2022-11-17T22:10:09.610Z
@RichardHardy I see but I guess it also depends on the nature of the nonstationarity. if it's a simple pattern like deterministic trends or cycles, or if it's like a random walk, etc?
MXXX
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2022-11-18T06:18:37.117Z
@MXXX, I agree.
Richard Hardy
<price><forecasting>
Forecasting prices vs GDP
MXXX
# Forecasting prices vs GDP

(Asked by: username_0 on 2022-11-14)

I heard a lecturer saying predicting prices is easier than predicting fundamentals (eg. GDP). I assume that's because prices are usually non-stationary? Does nonstationarity makes series more predictable? If so, are price changes still easier to forecast than say GDP changes?

**Tags:** price, forecasting

> **Comments:**
> **username_1**: Can you please define "*more predictable*" and "*easier to forecast*"?  
> **username_1**: Also, if you think prices are non-stationary, why do you think GDP is stationary?  
> **username_0**: @username_1 : In terms of minimizing MSE of the forecast. Yeah you are right I can't assume that.  I'm just trying to understand under what scenarios could this statement make more sense?  
> **username_2**: Nonstationarity is more often than not an impediment to forecasting.  
> **username_0**: @username_2 Do you know of any good papers/textbooks explaining why this is the case?  
> **username_2**: Not really. But the basic idea is fairly simple. It is harder to predict a process the future of which does not look like its past compared to one where the future does look like the past. Nonstationarity tends to make the future look different from the past, while stationarity per definition implies the opposite.  
> **username_0**: @username_2 I see but I guess it also depends on the nature of the nonstationarity. if it's a simple pattern like deterministic trends or cycles, or if it's like a random walk, etc?  
> **username_2**: @username_0, I agree.  

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## 0 answers

