Which of the following best describes regression to the mean??
A)Quiet periods in markets are punctuated by fundamental "shocks" or "discontinuities" that destroy old sources of advantage and replace them with new ones
B)The optimal allocation of society's resources at a given point in time
C)Clusters of activities that a firm does especially well in comparison with other firms
D)A firm does exceedingly well due to good luck or exceedingly poorly due to bad luck,but returns to normal performance following
E)None of the above

Question

Quizplus · Accepted Answer

Regression to the mean refers to the tendency for extreme or unusual events to be followed by more typical or average events. In the context of finance, this can mean that a firm experiences exceptional performance due to luck or exceptional circumstances and then returns to more normal levels of performance.

Which of the Following Best Describes Regression to the Mean