Multiples, Forecasting, And Asset Allocation

Multiples, Forecasting, And Asset Allocation

Multiples, Forecasting, And Asset Allocation

Javier Estrada

IESE Business School

April 15, 2015

Massif Capital’s Top Short Bets In The Real Asset Space [Exclisuve]

Screenshot 2022 08 10 18.57.51 1Since its founding by Will Thomson and Chip Russell in June 2016, the Massif Capital Real Asset Strategy has outperformed all of its real asset benchmarks. Since its inception, the long/short equity fund has returned 9% per annum net, compared to 6% for the Bloomberg Commodity Index, 3% for the 3 MSCI USA Infrastructure index Read More


Multiples such as D/P, P/E, and CAPE are useful when forecasting long-term returns, and largely useless when forecasting short-term returns. Given this mixed forecasting ability, the issue addressed in this article is whether these multiples can be used to devise successful asset allocation strategies in the sense of outperforming a simple static portfolio. The bulk of the evidence discussed here suggests that investors would be better off sticking with a simple 60-40 stock-bond portfolio.

Multiples, Forecasting, And Asset Allocation – Introduction

Multiples such as the dividend yield (D/P), the price?earnings ratio (P/E), and the cyclically?adjusted P/E ratio (CAPE) are typically viewed as useful tools to forecast long?term stock returns. In fact, the evidence does suggest that the more investors pay per dollar of a fundamental variable (dividends, earnings, or cyclically?adjusted earnings), the lower is the long?term return they get. The ultimate question considered here is whether multiples, which are useful tools to forecas