> I believe he shows in that book it's not a very good approximation
But what does that mean? What is a good predictor of future returns and what is not? If markets are not, what is?
> the market wildly overshoots and undershoots actual returns
Well, the actual returns are only known retrospectively, but the current prices have to reflect all future returns. So, of course, current prices will always be wrong, that's not surprising at all.
But what does that mean? What is a good predictor of future returns and what is not? If markets are not, what is?
> the market wildly overshoots and undershoots actual returns
Well, the actual returns are only known retrospectively, but the current prices have to reflect all future returns. So, of course, current prices will always be wrong, that's not surprising at all.