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Extrapolating the Past into the Future

People have a tendency to take the most recent, or the most easily available information and project the 'tend' into the future in a linear fashion - extrapolation.

Extrapolation is a dangerous game. Consider the following examples:


US Home Price Index: An extrapolation gone awry.


The volume of subprime loan originations had a 'straight line fit' from 2003 to 2006, but the line did not continue in 2007.


Exponential not extrapolation