One approach to forecasting returns is to use historical data. What are three (3) limitations of this approach? use 2 sentences
Question
One approach to forecasting returns is to use historical data.
What are three (3) limitations of this approach? (use 2 sentences)
Solution
Forecasting returns using historical data has several limitations. Firstly, past performance may not accurately predict future results due to changing market conditions and external factors, such as economic shifts or geopolitical events. Secondly, historical data might not account for rare or unprecedented events, leading to an underestimation of potential risks and volatility in future returns.
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