Reference no: EM131648606

Question: Stock strategy. Many investment advisors argue that after stocks have declined in value for 2 consecutive years, people should invest heavily because the market rarely declines 3 years in a row.

a) Since the stock market began in 1872, there have been two consecutive losing years eight times. In six of those cases, the market rose during the following year. Does this confirm the advice?

b) Overall, stocks have risen in value during 95 of the 130 years since the market began in 1872. How is this fact relevant in assessing the statistical reasoning of the advisors?