Wednesday, February 5, 2014

Punxsutawney Phil

*/by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*

*/Follow us on Twitter/* [1]

Punxsutawney Phil, that superstar of Groundhog Day has arisen from his burrow
and done whatever the heck it is that he does for the TV cameras and the
media and thus our forecast for an early or late spring is set.  Complete
unmitigated foolishness and all done in good fun you say.  Surely no one
believes that whether or not a groundhog sees his (her) shadow on a given day
each year could possibly have any forecasting ability whatsoever.  That is
very likely true, but have you noticed how much media attention it gets each
year?  In fact, I bet it was a top story on your local TV news (likely you
even have your own local version of Punxsutawny Phil – here it is
Shubenacadie Sam). 

It is all very much ado about nothing.  But if so, why does the media make
such a big fuss about it each year?  Groundhog Day is a quaint reminder
perhaps of a simpler time when people had hopes and dreams about being able
to forecast things such as if spring was going to come early or late this
year.  But how much of your risk reporting and prediction reporting is
equally quaint and based on more superstition than fact?  How much of your
risk reporting and discussion is much ado about nothing?  For instance, how
much does a change in your institution's VAR actually equate to realized
changes in risk?  Where are the Punxsutawney Phil's in your organization?


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