Extrapolating recent stock price movements as a forecast for future stock values tends to support the concept of regression to the mean.

Question

Quizplus · Accepted Answer

Extrapolating recent stock price movements as a forecast for future stock values is more aligned with the concept of momentum investing, which assumes that stocks that have performed well or poorly will continue to do so. Regression to the mean suggests that extreme performance tends to return to average levels over time.

Extrapolating Recent Stock Price Movements as a Forecast for Future