Competition

Data-Driven Methods in Finance: In-Class Competition

Organized by nyc2107 - Current server time: Aug. 17, 2025, 9:23 a.m. UTC

First phase

Test
June 1, 2023, 6 p.m. UTC

End

Competition Ends
Jan. 15, 2024, 6 p.m. UTC

Our in-class forecasting contest urges students to effectively translate the theoretical knowledge acquired from the course into practical situations. The challenge concentrates on the analysis and prediction of financial market trends, as well as the relationship between forecast accuracy and subsequent investment returns. This competition acts as a platform for students to scrutinize and question the principles underlying the Efficient Market Hypothesis (EMH) and its real-world ramifications.

This hypothesis posits that all pertinent information is reflected in stock prices, thereby eliminating the likelihood of consistently outperforming the market. Although evidence largely supports this theory, the consistent market outperformance of certain investment magnates casts doubt on the EMH's absolute validity.

Our in-class contest seeks to delve into this seeming paradox. Its objective is to bolster students' comprehension of various elements that might contribute to above-average financial returns, especially concerning accurate forecasting and deviations from the EMH. The competition will also explore the reasons behind such deviations.

Key aspects the competition will emphasize include:

  1. The impact of precise market or individual asset forecasting on superior returns.
  2. The significance of accurate modeling of market or individual asset uncertainty.
  3. The importance of incorporating forecast accuracy and uncertainty into investment decision-making.
  4. The potential advantages of using discretion in forecasting and investing to outperform the market.
  5. The influence of consistent investment strategies.
  6. How other elements, including biases and inefficiencies in prediction and investment decision-making, can be exploited to achieve above-average returns.

Timeline

The competition will unfold in real-time throughout the semester.

Assessment Criteria

Participants will be tested on two fronts: their forecasting abilities, judged by the ranked probability score, and their investment decisions, judged by the information ratio.

Asset Classes

The competitive arena will include a diverse selection of three asset classes: 50 stocks from the S&P 500 index, 50 international ETFs, and 10 cryptocurrencies, curated to capture a wide spectrum of the market.

Submission Details

There will be 10 submission points throughout the competition, complemented by an additional test point. Each has a deadline of 6 PM ET on the Sunday preceding the start of the applicable investment period. Participants must outline their predictions and strategies for the upcoming week by submitting their forecasts and investment decisions at each point. The forecast horizon extends over one week, typically five trading days, with no overlap in the evaluation periods.

For instance, the cut-off for the first submission point is 6 PM ET on Sunday, September 18, 2022. Participants should submit forecasts and investment decisions that reflect the closing value of the final trading day of the following week, September 23, 2022 (Friday).

Each submission point allows students to submit a single CSV file composed of seven columns with 110 values each (one for each asset):

1. The first column should identify the asset referred to in the forecasts and corresponding investment decisions. The acronym of each asset will be utilized as the identifier.

2. The next five columns should contain positive values that add up to one horizontally. These represent the probabilities of the ranks of the forecasted percentage return for each asset (stocks or ETFs). Rank 1 is the lowest forecasted percentage return, and rank 5 is the highest.

3. The seventh column should include numerical values corresponding to the weights assigned for investing in each asset. Positive values indicate long positions, negative values indicate short positions, and zero indicates no position.

Only students from Columbia University who are enrolled in the Data-Driven Methods in Finance class are eligible to participate in the competition.

Test

Start: June 1, 2023, 6 p.m.

Description: Test submission

Final

Start: Sept. 1, 2023, 6 p.m.

Description: First submission

Competition Ends

Jan. 15, 2024, 6 p.m.

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