Question #22
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 8
Status: Correct
Correct Answer: A
Question
Historical information used to determine the long-term average returns from equity markets may suffer from survivorship bias, resulting in:
Answer Choices:
A. deflating the mean return
B. unpredictable results
C. inflating the mean return
Explanation
Survivorship bias refers to the weeding out of underperforming firms, resulting in an
inflated value for the mean return.