What is prediction?

A prediction is a statement about the likelihood of a future event. Predictions are an intrinsic part of our everyday lives. From weather forecasts to GPS estimations and sports predictions, experts and algorithms analyze historical data and current contextual factors to discern patterns, trends, and relationships that inform their predictions. By blending insights from the past with present information, these predictions help us plan, make informed decisions, and navigate the world with greater certainty and efficacy.We know that past performance is highly predictive of future actions and behaviors. Look no further than the infield shift in baseball (since outlawed in 2023), where infielders are positioned on the playing field based on the predictions of that batter’s hitting tendencies.

Figure 6.1: Infield Shift in Baseball Based Upon Batter Hitting Predictions

And while the Securities and Exchange Commission (SEC) cautions investors against assuming that...