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The Efficient Valuation Hypothesis: The Long View

In: Tailored Wealth Management

Author

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  • Niall J. Gannon

    (The Gannon Group)

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.

Suggested Citation

  • Niall J. Gannon, 2019. "The Efficient Valuation Hypothesis: The Long View," Springer Books, in: Tailored Wealth Management, chapter 7, pages 57-64, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-99780-3_7
    DOI: 10.1007/978-3-319-99780-3_7
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