Does history repeat itself? Unless we suspect that expected return changes nontrivially over time, the sample average return is an unbiased estimator of expected return. The unbiasedness of the sample average return is its main advantage The main disadvantage of the sample average Is Its imprecision GM 1991-2000 the sample average return is 14% per year. The standard error is 10% per year. With 95% confidence, th le true expected return is within two standard errors of the sample average [-6%,34%]Does history repeat itself? ◼ Unless we suspect that expected return changes nontrivially over time, the sample average return is an unbiased estimator of expected return. The unbiasedness of the sample average return is its main advantage. ◼ The main disadvantage of the sample average is its imprecision. ◼ GM: 1991-2000, the sample average return is 14% per year. The standard error is 10% per year. With 95% confidence, the true expected return is within two standard errors of the sample average: [-6%, 34%]