Stock strategy Many investment advisors argue that afterstocks have declined in value for 2 consecutive years,people should invest heavily because the market rarelydeclines 3 years in a row.a) Since the stock market began in 1872, there havebeen two consecutive losing years eight times. In sixof those cases, the market rose during the followingyear. Does this confirm the advice?b) Overall, stocks have risen in value during 95 of the130 years since the market began in 1872. How is thisfact relevant in assessing the statistical reasoning ofthe advisors?

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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?

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