This article is linked with permission by the Financial Planning Association, Journal of Financial Planning, July 2002, William Reichenstein, What Do Past Stock Market Returns Tell Us About the Future?
This study reviews and critiques several recent studies that conclude that long-run real stock returns will be below historic levels, and the equity risk premium will be below historic averages – and perhaps negative. It explains the theory behind the studies’ conclusions. This theoretical framework helps when critiquing these studies and when explaining differences in their predictions. Finally, it discusses the investment implications of lower real stock returns.
Read the complete article, which can be found on the Journal of Financial Planning website.
