November 2020
Intermediate to advanced
256 pages
8h 12m
English
book
Beyond Diversification: What Every Investor Needs to Know About Asset Allocation
by Sebastien Page
Content preview from Beyond Diversification: What Every Investor Needs to Know About Asset Allocation
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2
Valuation and Something About Kool-Aid
To which earnings (E) should we apply the P/E ratio? Valuation should be based on future earnings, not current earnings.
—JPP
FOR STOCKS, THE NEXT STEP IS TO REFINE OUR EARNINGS forecasts. Then we can decompose expected returns into more detailed building blocks. When I estimated the equity market risk premium as an input to the CAPM, I showed that the simplest way to forecast equity returns based on valuation is to invert the price-to-earnings ratio. We divide 1 by the quoted P/E number, et voilà, we have a reasonable long-term return forecast. But in finance, especially when we try to forecast returns, nothing is ever that simple. I introduced the battle of the professors between Siegel and Shiller, ...
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.