Question
Consider a hypothetical exercise to evaluate the skill of four financial analysts (Analyst 1, Analyst 2, Analyst 3, and Analyst 4). On December 31 of
Consider a hypothetical exercise to evaluate the skill of four financial analysts (Analyst 1, Analyst 2, Analyst 3, and Analyst 4). On December 31 of a given year, each analyst tries to pick a good U.S. stock. On December 31 of the subsequent year, the return on this stock is recorded.
Suppose that the returns on the stocks picked by the analysts were as follows:
i. Analyst 1, +14%;
ii. Analyst 2, +15%;
iii. Analyst 3, +16%; and
iv. Analyst 4: +17%.
Do these returns suggest that:
a. The four analysts do not have skill;
b. The four analysts have skill;
c. None of the above?
explain
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