What do you think about the possibility of forecasting economic processes based on the analysis of large data sets in Big Data database systems?
Will Big Data help in precisely forecasting future economic processes, including in terms of forecasting stock exchange trends on stock exchanges?
Will Big Data help in forecasting future, next financial, economic and other crises such as climate disasters, weather anomalies, earthquakes, etc.?
Please reply
Best wishes
The answer to this straight question is the straight resounding NO.
Data (big or little) represent the past, i.e. what was already happen. We are trying to predict the future using solely the past. Is it always possible?
In general the future events are NOT defined solely by their past.
When sensors or social media are used to collect data without pre-planned active experimentation, then the data usually contain a lot of noise and correlations.
The future "black swan effect" or rare events that were not accounted for or did not happen in the past cannot be predicted no matter how much past data (big or small) are used.
Only the stable signal (pattern) that can be projected into the future can provide meaningful prediction using a validated mathematical model within the frame of this particular model. Noise is a data pattern that is unstable (disappears) in the longer run. Prediction made using mostly noisy and correlated data will not be reliable, or prediction (say, classification) will be inundated by false positives or false negatives.
The bottom line: economics, financial markets, climate and natural events are highly nonlinear chaotic systems that cannot be reliably predicted in the long run using only past data (big or little).
See also my post "What is predictable and what is not" https://www.linkedin.com/pulse/predictive-analytics-big-data-what-predictable-alexander-kolker/
To certain extent, big data will help in forecasting future trends, but we can't say that 100% forecast will be accurate.
The economy is a complex system. It is related with various components. Big data can help to measure, track, and describe economic activity.
Big data research provides many oportunities to extend our perception and knowledge about state of things and became very popular recently. Definitely it is great way to reveal common behaviour of a given entity and predicting the future activity. I think that system dynamics analysis (systemic approach coined and developed by J. W. Forrester) is very approptiate in predicting the future or creating particular models taking into account many factors and even internal and external conditions of the system. Nevertheless, using this perspetive sometimes draws analytists into trap. The problem is that researcher can limits himself only to empirical data and reject broader context.
Listen to what Albert Einstein said: small is beautiful. The smaller the better. A good model is one that is simplified. Big data shows the human capacity to collect and classify data into large and complex bundle of data set, it does not increase our ability to analyze it. It just expands the boundary of data scope. The shortest distance between two points is a straight line. Simplicity in modeling and clarity in data are the solution to today's problem in research. What we failed in simplicity, we want to replace it with complexity.... that is not much of a strategy of problem solving.
Big data will help as long as there are new and more insightful theoretical models. The latter could be tested using the former. Big data per se is essentially nothing.
Big data será y lo es de hecho, una herramienta de aproximación y ayudará a analizar las tendencias, pero como se sabe según las experiencias con herramientas como Eviews, pertinentes para los análisis econométricos, la precisión no es una cualidad cuando del futuro se trata, cuando se tienen variables tan complejas como impredecibles. Big data seguirá siendo una aproximación, aunque con datos más globales y más cercanos al tiempo real.
The answer to this straight question is the straight resounding NO.
Data (big or little) represent the past, i.e. what was already happen. We are trying to predict the future using solely the past. Is it always possible?
In general the future events are NOT defined solely by their past.
When sensors or social media are used to collect data without pre-planned active experimentation, then the data usually contain a lot of noise and correlations.
The future "black swan effect" or rare events that were not accounted for or did not happen in the past cannot be predicted no matter how much past data (big or small) are used.
Only the stable signal (pattern) that can be projected into the future can provide meaningful prediction using a validated mathematical model within the frame of this particular model. Noise is a data pattern that is unstable (disappears) in the longer run. Prediction made using mostly noisy and correlated data will not be reliable, or prediction (say, classification) will be inundated by false positives or false negatives.
The bottom line: economics, financial markets, climate and natural events are highly nonlinear chaotic systems that cannot be reliably predicted in the long run using only past data (big or little).
See also my post "What is predictable and what is not" https://www.linkedin.com/pulse/predictive-analytics-big-data-what-predictable-alexander-kolker/
In view of the above, it is also important to include in the above discussion also the following issue:
Does the use of Big Data database technologies and Business Intelligence analytics increase the accuracy of economic and financial analyzes carried out?
Do the results of the analyzes carried out using Big Data database technologies and Business Intelligence analytics allow improving the accuracy of conducted economic and financial analyzes and other analyzes of the type of technical analysis, fundamental analysis and other analysis of economic performance, economic and financial situation, property valuation, determination of business development perspectives , joint-stock companies, issuers of securities whose securities are traded on the stock exchange on the stock exchange?
In the context of the above discussion, another question arises:
Does it result in the use of Big Data database technologies and Business Intelligence analytics for technical analysis, fundamental analysis and other analysis of economic effectiveness, economic and financial situation, property valuation, determining the development perspectives of enterprises, joint-stock companies, issuers of securities whose securities are located in the stock exchange trading on the stock exchange, the efficiency of analytical processes increases? Do the results of conducted analyzes using Big Data database technologies and Business Intelligence analytics allow to improve the accuracy of conducted analyzes and increase the probability of prediction, forecasted phenomena and economic processes occurring?
Do you agree with my opinion on this matter?
In view of the above, I am asking you the following question:
Do the results of the analyzes carried out using Big Data database technologies and Business Intelligence analytics allow improving the accuracy of conducted economic and financial analyzes and other analyzes of the type of technical analysis, fundamental analysis and other analysis of economic performance, economic and financial situation, property valuation, determination of business development perspectives , joint-stock companies, issuers of securities whose securities are traded on the stock exchange on the stock exchange?
Please reply
I invite you to the discussion
Thank you very much
Dear Colleagues and Friends from RG
The issues of the use of information contained in Big Data database systems for the purposes of carrying out Business Intelligence analyzes are described in the publications:
Article APPLICATION OF DATA BASE SYSTEMS BIG DATA AND BUSINESS INTEL...
Article The Big Data technologies as an important factor of electron...
Article The Technological Solutions Big Data and the Importance of B...
I invite you to discussion and cooperation.
Best wishes
In view of the above, in the context of interesting observations, inspiring the considerations conducted during the above discussion, I would like to add the following conclusion formulated as a summary of my previous considerations regarding this topic. In the context of the above considerations, the following question is also current:
What is more important in carrying out prognostic analyzes of developments in the securities markets based on the processing of economic, financial and statistical data collected in Big Data database systems using advanced data processing technologies, multi-faceted analytical models of Industry 4.0 technologies, including Business Intelligence analytical platforms:
- having more current economic, financial and statistical data collected in Big Data database systems describing the current situation on the securities markets, including economic and financial data on issuers of individual securities, market data and macroeconomic environment,
- whether the involvement of the latest IT technology, modern Business Intelligence analytical platforms and other advanced data processing technologies typical of the current fourth technological revolution of Industry 4.0,
- is the development of constantly updated advanced analytical models built of many economic and financial indicators, adapted to a specific type of capital market, specific types of securities analyzed, issuers of securities, market and macroeconomic environment?
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