According to Simulations of the Prices of Cyclical Stocks,which of the Following

question 4

Multiple Choice

According to simulations of the prices of cyclical stocks,which of the following seems to best characterize how analysts appear to make forecasts?

• A)Analysts make naive,random-walk forecasts,which are not very accurate.
• B)Analysts naively make forecasts based on the extrapolation of recent trends.
• C)Analysts make forecasts based on the assumptions that historical cycles will repeat as they have in the past.
• D)Analysts make forecasts based on a 50/50 chance the firm will exhibit past cyclicality or break into a new trend.