In predicting the expected future return of the market,one of the dangers is that:
A) the past is not indicative of the future.
B) the past period measured is too short to get a reasonable estimate of the future.
C) the equity premium does not include the premium on debt.
D) the past is not indicative of the future and the past period measured is too short to get a reasonable estimate of the future.
E) the past is not indicative of the future and the equity premium does not include the premium on debt.

Question

Quizplus · Accepted Answer

Both options A and B are potential dangers when predicting future market returns, as the past may not accurately reflect future performance and shorter time periods may not provide enough data for reliable estimates. Therefore, option D is the best choice as it encompasses both of these concerns. Option C is not as relevant to the danger of predicting future market returns. Option E also includes the concern about the equity premium, but it does not cover the possibility that the past may not be indicative of the future.

In Predicting the Expected Future Return of the Market,one of the Dangers