Investors avoid this stock because returns trail the index. Therefore returns will keep trailing. Flaw?
- Investors are wrong.
- Index changes monthly.
- Investors are not analysts.
- Past performance does not predict future.
Show answer and solution
Correct answer: D. Past performance does not predict future.
1. Inferring future from past returns is a known fallacy.
_Source: 501-GMAT-Questions Ch 2 Critical Reasoning_