Forecasts for February Returns of Berkshire Hathaway

In the post discussing Warren Buffett's Berkshire Hathaway vehicle, I omitted to forecast returns for February, 2009 (which was done for all the other funds and companies studied here).

So, briefly, based on the whole data sample linear regression we forcast a return of 0.75% for BRK A shares. The prior number is for the least squares estimator, which is equivalent to assuming that the innovations are i.i.d. Normal. In the prior post, we raised the issue as to whether a robust regression might provide a more accurate result. I repeated the regression using least absolute deviations, which is equivalent to assuming that the innovations are i.i.d. Laplacian (i.e. of the form exp -|x|). This tempered the forecast to 0.27%.

UPDATE: This forecast is based on January data and regressions up to the end of January. February is 2/3 over at this point, and BRK A is down 15% on the month (from $90,000 to $76,900 per share). At this point, it seems unlikely that the return for the rest of the month will be sufficient to put BRK into the black, as the model predicts.