Mean Reversion Refers to the Tendency for

question 17

Multiple Choice

Mean reversion refers to the tendency for

• A)futures prices to revert to the prices of the underlying securities.
• B)the long-run mean return on stocks to equal the long-run mean return on bonds.
• C)stocks with high returns today to experience low returns in the future and for stocks with low returns today to experience high returns in the future.
• D)financial analysts whose stock picks have earned above-normal returns in the past to be unable to pick stocks that will perform as well in the future.

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Definitions:

Involuntary Commitment

The legal process through which individuals with severe mental health issues are placed into treatment facilities without their consent when they pose a risk to themselves or others.

Cognitive Therapy

A form of psychotherapy that emphasizes the role of thought patterns and beliefs in influencing behavior, aiming to change negative thinking patterns to improve emotional state and behavior.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome, often reflecting apprehension about future events.

DSM-IV

The Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, which is a guide used by healthcare professionals to diagnose mental disorders.