Comments on: Market Returns 5 Years After Historical Market Declines

By: Veckans Artiklar V26-09 « FuckPeace.Net

Veckans Artiklar V26-09 « FuckPeace.Net — Sat, 29 Aug 2009 00:41:56 +0000

[...] bra diagram om hur mycket totalavkastning man har fått på börsen 5 år efter börsnedgång. Market Returns 5 years after historical market declines – av the Dividend guy. Svensk [...]

By: Weekend Linkage - April 12, 2009

Weekend Linkage - April 12, 2009 — Mon, 13 Apr 2009 02:17:06 +0000

[...] Market Returns 5 Years After Historical Market Declines @ The Dividend Guy [...]

By: Best Weekly Links - “How do I Look?” Edition | Darwin's Finance

Best Weekly Links - “How do I Look?” Edition | Darwin's Finance — Sat, 11 Apr 2009 19:27:50 +0000

[...] Analysis of market returns after major declines [...]

By: Recommended Reading - April 10, 2009 | Old School Value

Recommended Reading - April 10, 2009 | Old School Value — Fri, 10 Apr 2009 07:44:12 +0000

[...] Market Returns 5 Years After Historical Market Declines by The Dividend Guy [...]

By: ObliviousInvestor

ObliviousInvestor — Mon, 06 Apr 2009 12:00:51 +0000

Hi TDG, thanks for bringing this point up. It’s one I’ve been thinking about a lot lately as well.

The periods-high-returns-after-periods-of-low-returns isn’t really a fluke. There’s very good reasoning behind it.

It’s simply that, by the end of a period of low returns, the average market P/E ratio is generally quite low–generally far below a historically typical P/E ratio.

Therefore it’s very likely that at any point some years later–whether that’s 5 years, 10 years, or 20–the average market P/E ratio will be higher (even if we assume that the P/E ratio at any point is random and entirely unpredictable). And the increase in P/E ratio–plus the normal effect of dividends and earnings growth–will lead to somewhat above average returns.