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I'm currently taking a introductory mathematical finance course in university and recently on the news (BBC, etc), it states that the economic markets are shown to be slowing down for the next few years or so. This got me curious - is there a method in mathematics and/or statistics that allows one to show that the market is indeed slowing down in growth? The only areas I could think of currently is forecasting methods. Some insight will be appreciated, especially if some reference books can be suggested.

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  • $\begingroup$ I don't know exactly what people who made this statement have in mind. Perhaps they simply meant "the markets have been very good these last few years, we cannot expect these excellent returns to continue forever". This is true with any random system (weather: after many sunny days there must eventually be rain, coin tossing: after many Heads there will sooner or later be a Tail, etc.). It is simple "peasant wisdom" about probability rather than anything else IMHO $\endgroup$ – noob2 Nov 2 '17 at 12:18
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    $\begingroup$ Could you state what exactly you think is "slowing down?" The velocity of what is declining? $\endgroup$ – Matthew Gunn Nov 2 '17 at 12:39
  • $\begingroup$ @MatthewGunn Sorry for the unclear question, but I refer to rate of growth of the financial markets - say stock markets for example. $\endgroup$ – Stoner Nov 2 '17 at 13:37
  • $\begingroup$ @noob2 Hmm do you mean that it is just a general perspective that is not based on through analysis, but pure speculation? $\endgroup$ – Stoner Nov 2 '17 at 13:38
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    $\begingroup$ Hi Stoner, there are actually many models in Economics to predict economic growth. An easy read since you are just getting started in the field is Introduction to Economic Growth, by Charles Jones. This is not what is used by Central Banks and investment banks nowadays to predict growth (they use more advanced econometric models such as DSGE and others), but it is a good start to get you the intuition. $\endgroup$ – python_enthusiast Nov 2 '17 at 20:15

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