I am getting confused between “if only” vs. ceteris paribus. What is the difference
http://www.analystforum.com/phorums/read.php?13,1237062,1237073#msg-1237073 ceteris paribus - variable does not exist at all. if only - variable exists, but what could have been if the level/value had been the same…
example for ‘if only’: Had interest rates risen another 0.5%, my prediction would have been accurate. example for ‘ceteris paribus’: I made a prediction assuming only Int rates will change and nothing else (keeping everything else constant). However, because inflation rates (for eg) changed, my prediction went wrong. hope that helps…
I had an issue with this a while back. The way I finally saw it was that the “if only” defense is used when what happened was a change in a variable that was in the original analysis. For example: the analyst assumes that equities will rise b/c he believes int rates will decline. Instead int rates increase which causes equities to decrease. This is the “if only” defense because the analyst would have been right “if only” int rates had declined like originally expected. The Ceteris Paribus defense is when something else outside the original analysis happens. for example: int rates actually do decline, but Lehman goes bankrupt and the general economy is mired in a credit crises. This is the Ceteris Paribus defence because the original variable did occur, but something else happened that caused the analysis to be wrong.
Thanks a lot. you guys rock.