While We Are Using Historic Return to Estimate a Stock's

question 82

Essay

While we are using historic return to estimate a stock's beta, why can't we use historic data to forecast the expected return for the stock?

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Definitions:

Treasury Bonds

Long-term government securities issued by the U.S. Department of the Treasury with a maturity period typically ranging from 20 to 30 years.

Corporate Bonds

Debt securities issued by corporations to finance their operations, typically offering fixed interest payments and repayment of principal at maturity.

Yield Spread

The difference in yields between two different types of financial securities, often used as a measure of relative risk.

Interest Rates

The cost of borrowing money expressed as a percentage of the loan amount, or the rate earned on invested funds.