Homework Answers
Answer:-
When the analyst forecasts the future price based on rational expectations the realized price may differ from the forecast price.
Rational expectations are used in macroeconomic theory where the analysts make a forecast based on all the available market information and all the historical trends. The rational expectations need not be accurately correct but at times they may be deviate from the forecast price.
So to conclude that the realized price was lower by $2 than the forecast price does not mean that the forecast was not based on rational expectations.It can be based on rational expectations where the result deviated from the expected forecast price.
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