Comparing the range of the one-year returns on stocks to the range of the twenty-year returns over the period from 1926 to 2005 reveals that
A)the range has been about the same.
B)the range has been narrower for one-year returns.
C)the range has been narrower for twenty-year returns.
D)there has been no consistent relationship between the ranges for one-year returns and twenty-year returns.

Question

Quizplus · Accepted Answer

According to historical data from 1926 to 2005, the range of one-year returns on stocks has been much wider than the range of twenty-year returns. This is because short-term returns are subject to much more volatility and uncertainty than long-term returns. Over a longer time horizon, the impact of fluctuations and market events tends to be smoothed out, resulting in narrower ranges of returns. Therefore, choice C is the correct answer.

Comparing the Range of the One-Year Returns on Stocks to the Range