An online investment blogger advises investing in mutual funds that have perform
ID: 3379886 • Letter: A
Question
An online investment blogger advises investing in mutual funds that have performed badly the past year because "regression to the mean tells us that they will do well next year. " Is he correct? Choose the correct answer below. No, he is incorrect. The mutual fund will regress to the mean, but it may not do so for a few years. No, he is incorrect. The mutual fund will regress to the mean, but this does not mean it will have a positive return. No, he is incorrect. Although the performance of funds will cluster around the mean on average, he cannot predict how any particular fund will do. Yes, he is correct.Explanation / Answer
Given that an online investment advises investing in mutual funds that have performed badly the [ast year because regression to the mean tells us that they will do well next year.
We have to say the given statement is correct or not.
The third option is correct that means no he is incorrect the performance of funds will cluster around the mean on average he cannot predict how any particular fund will do.
The information is given about the past year and future year or next year which is regarded with the time series.
Thats why this statement is incorrect.