Serious question we all know the PE ratio that various indices are trading at currently whether it be TSX, DOW , S & P, we also know the market cap valuation for each individual component of the index. Based on the data, you may think a sector, stock, or index is overvalued.
That being said, when does the performance of a sector or, more specifically, an index become the normal annual return based on historic data. Would it take 20,30 40 or 100 years of historical performance data to be the normal or new normal.
For example, would it take the nasdaq 100 index, 30 years of an average annual return of 15 percent to be considered the new normal for this index for institutional investors when managing portfolios. When does it stop being recency bias and instead the normal return for the index or sector.
