Question: 5.82 An analyst forecasts corporate earnings, and her record is evaluated by comparing actual earnings with predicted earnings. Define the following: actual earnings = predicted

5.82 An analyst forecasts corporate earnings, and her record is evaluated by comparing actual earnings with predicted earnings. Define the following:

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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