You are about to use a historical return assumption in a financial model, and you want to check whether the assumed average is supported by observed data. Before using it, you need to decide if the assumption is reasonable.
How do you test whether a financial assumption is reasonable before using it in a model?
Translate an assumption into a null hypothesisUse a one-sample test to compare data with the assumed valueInterpret both the p-value and the confidence intervalExplain what the result means for model inputs