When dealing with the history of capital market returns, an average stock market return is useful because it simplifies detailed market data & is the best estimate of any one year's stock market return during the specified period.
Historical returns are frequently linked to a security's or index's previous performance, such the S&P 500. When attempting to forecast future returns or predict how a security could respond to a specific circumstance, such as a decline in consumer spending, analysts look at historical return data.
When predicting the standard deviations of upcoming data points, historical returns might also be helpful.
A security or market's past performance can be understood by analyzing historical data, which ranges from predictable economic cycles to unexpected exogenous global occurrences.
Investors interpreting historical returns should keep in mind that past performance does not guarantee future performance.
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