Mean Reversion Refers to the Fact That

question 75

Multiple Choice

Mean reversion refers to the fact that

• A)small firms have higher than average returns.
• B)stocks that have had low returns in the past are more likely to do well in the future.
• C)stock returns are high during the month of January.
• D)stock prices fluctuate more than is justified by fundamentals.

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Definitions:

Controlled Experiments

Experimental designs in which researchers manipulate variables under controlled conditions to determine cause and effect.

Correlation

A mutual relationship or connection between two or more things, where one does not necessarily cause the other.

Causal Relationship

A connection between two events where one is the effect of the other or happening as a result of the other.

Argument by Analogy

A form of reasoning that compares two different situations or things to draw a conclusion about their similarities.