What is reference class forecasting?

Question

Options

• AAn approach for implementing portfolio management in a stable environment where the top
• BPredicting future performance based on an assessment of the past performance
• CAn approach for implementing portfolio management part by part as and when time permits
• DAn approach for implementing portfolio management in a less-stable environment, where strategy

• B
  86% (24)
• C
  11% (3)
• D
  4% (1)

Explanation

Option B is correct because reference class forecasting is a prediction method developed by Daniel Kahneman that estimates future outcomes by examining the actual historical outcomes of a comparable group of past projects or situations (the "reference class"), rather than relying solely on inside-view planning assumptions.

Options A, C, and D all describe portfolio management implementation approaches - stable environments, phased rollouts, and unstable environments respectively - which are entirely unrelated concepts; forecasting and portfolio implementation methodology are distinct disciplines.

Memory tip: Break down the term itself - a "reference class" is a class (group) of similar past events you reference to make predictions. If you're launching a new product, you'd look at what happened with 50 similar product launches, not just plan from scratch. Think: "History as a predictor."

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