Robert Arnott, Sina Ehsani, Campbell Harvey, and Omid Shakernia, authors of the September 2025 study “Revaluation Alpha,” examined how much of a factor’s historical returns have been derived from changes in valuation levels (“revaluation alpha”). Their hypothesis was that this return component is typically nonrecurring, making it dangerous to extrapolate historical returns as indicators of future results.
What the Authors Examined
The authors defined “revaluation return” as the piece of h...
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