Money For the Rest of Us Indexing Bubble and Asset Class Returns Still Revert to the Mean
5 snips
Dec 11, 2024 AI Snips
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Episode notes
Reversion to the Mean
- Extreme outcomes, like exceptional stock returns, often revert to the average.
- This is a key financial concept called reversion to the mean.
Impact of Passive Investing
- Passive investing and indexing have become increasingly popular.
- This has influenced U.S. stock market overvaluation.
Forecasting Returns
- Asset returns come from income, income growth, and valuation changes.
- Use these factors to forecast long-term returns, contrary to some beliefs.