Which of the Following Statements About the Use of Historical

question 38

Multiple Choice

Which of the following statements about the use of historical data is false?

• A)Correlations and risk measures tend to be fairly stable and, therefore, past data can be assumed to reasonably represent the future.
• B)In order to examine return patterns, a minimum of 20 to 30 years of data is necessary.
• C)Historical average returns are good predictors of the future, but the rate of return in any given year should not be relied on to predict the future.
• D)All of the above statements are true.

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Definitions:

Reporting Entities

Organizations or business entities that are required to prepare and present financial statements to relevant stakeholders, usually following specific reporting standards.

Consolidated Financial Statements

Financial statements that present the assets, liabilities, and operating results of a parent company and its subsidiaries as if they were a single entity.

Capacity To Control

Refers to the ability of an entity to direct the financial and operating policies of another entity so as to benefit from its activities.