Explain the Rational Expectations Hypothesis

question 249

Essay

Explain the rational expectations hypothesis.

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Definitions:

Regression Toward the Mean

The statistical phenomenon that high or low scores naturally tend to move closer to the average over time.

Extreme Scores

Values in a data set that are significantly higher or lower than the majority of the other scores, potentially skewing results.

Less Extreme

Refers to measures or values that are closer to the average or mean in a distribution, as opposed to being more extreme or far from the average.

Mean

A statistical measure representing the average value in a set of numbers, calculated by dividing the sum of all values by the number of values.