CASE

If one wanted to make a long term investment in the NASDAQ, it would make sense to examine the index in the last 10 years. The data for those years would allow him to forecast the future performance of that market. The graph below shows the performace of NASDAQ in the last 10 years. There is and exponential trendline indicating where the market might be headed, providing valuable information for the decision on whether to invest.

The graph shows, that there was a slowly accelerating increase in the market index until about the end of 1998. From then on, the index increased at a much higher rate than previously, until about the beginning of 2000. From here, the index declined sharply with occasional peaks. The graph indicates, that between late 1998 and late 2001 the market rose and fell sharply. This is known as the IT bubble. On the long-run, it may be considered an extraordinary event, and one has to think about whether to include it in the forecast.