Markets And Mean Reversion Tendencies: Deutsche Bank

Deutsche Bank's annual Long-Term Asset Return Study was originally put together by the bank to explore the notion that developed world asset classes traditionally exhibit a rhythm of returns through time that are subject to definite mean reversion tendencies.

And with this being the case, within every edition of the annual publication, Deutsche Bank publishes a table which shows what the nominal and real returns could be over the next decade if assets revert back to their long-term average valuations.

Mean reversion assumptions

The data used to calculate these projected returns is based on a number of assumptions, the key assumption being that earnings, PE valuations, inflation, real yields and economic growth return to their long-run averages/trend. As a result, the conclusions drawn are only meant to be...