- the tendency to believe any asset market is “due” for a major move higher or lower based on recent previous performance.
The author notes that applying this concept is difficult because unlike coins, each day of trading is not fully independent from the previous day."What happened yesterday can affect what happens today. This explains why the very best days in the market and the very worst days tend to occur near each other.” The temptation then, is for investors to believe they can predict the future from past returns.Mr.
BofA Securities, previously Bank of America Merrill Lynch, quantitative strategist Savita Subramanian has repeatedly shown that price-to-earnings ratios for U.S. markets are. The current PE ratio for the S&P 500 implies an average annual return of approximately 5 per cent for the next decade.