The Efficient Valuation Hypothesis: The Long View

Niall J. Gannon
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Niall J. Gannon: The Gannon Group

Chapter 7 in Tailored Wealth Management, 2019, pp 57-64 from Springer

Abstract: Abstract Tailored Wealth Management is a fitting title for this book because wealthy investors experience markedly different outcomes in managing their wealth, which makes a “one size fits all” approach ineffective. Cause and effect is a theme that runs throughout this book, and I am more than ever convinced that it is time to challenge two theories: (1) that stock prices are random and (2) that prices revert to their mean, two widely held theories used by wealth management firms, academics, and robo-advisors. Most investors have an understanding that inception yield is predictive of the future returns of a fixed income (bond) portfolio. We aim to illustrate that starting earnings yields are similarly predictive of the future returns in an equity portfolio, over 20-year investment periods.

Date: 2019
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DOI: 10.1007/978-3-319-99780-3_7

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