Assessing Expected Returns

At a recent meeting with a nonprofit organization, my firm was asked to explain why we don’t consider historical stock returns the best estimator of future returns. They wanted to understand why we instead rely on our own forecasts.

Their request came in part because another firm had suggested in a previous pitch that forecasts using anything other than historical returns were nothing more than opinion.

I thought sharing our response to the question posed by the nonprofit would be helpful for investors in general. First, we completely agree that investors shouldn’t make decisions based on personal opinion. Rather, investment decisions should be grounded in applicable academic research.

Read the rest of the article on ETF.com.

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