An analyst forecasts corporate earnings, and her record is evaluated by comparing actual earnings with predicted earnings.
Question:
actual earnings = predicted earnings + forecast error.
If the predicted earnings and forecast error are independent of each other, show that the variance of predicted earnings is less than the variance of actual earnings.
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Step by Step Answer:
Given that the variance of both predicted earnings and forec...View the full answer
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Related Book For 
Statistics For Business And Economics
ISBN: 9780132745659
8th Edition
Authors: Paul Newbold, William Carlson, Betty Thorne
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