Market Multiple Mean-Reversion: Red Light or Red Herring? Elm research published on Bloomberg

[Bloomberg] There may be many reasons to worry about the current high price level of U.S. equities, but mean-reversion of the market’s valuation to its historical average should not in itself be high on the list. In fact, deviations from the mean for the most popular valuation measure – CAPE (the Cyclically-Adjusted Price-to-Earnings ratio) — don’t actually tell us much about expected market returns that the absolute level of CAPE doesn’t already tell us.

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