Shawn Earned an Average Return of 14

question 44

Essay

Shawn earned an average return of 14.6 percent on his investments over the past 20 years while the S&P 500,a measure of the overall market,only returned an average of 13.9 percent.Explain how this can occur if the stock market is efficient.

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Definitions:

Exponential Smoothing

Exponential smoothing is a forecasting technique that applies decreasing weights to past observations, with more recent data given more significance.

Holt's Method

A forecasting technique that extends exponential smoothing to capture trends in historical data, used in time series analysis.

Effective Forecasting

The process of predicting future trends, demand, and events accurately using historical data, statistical models, and market analysis to inform decision-making.

Moving Average

A statistical technique used to analyze data points by creating a series of averages of different subsets of the full data set, commonly used in stock market analysis.