There has been an incredible amount of research in the past 50 years on how financial markets work – concepts like the risk-return trade-off, the theory of interest, the efficient markets hypothesis – that has led to more sophisticated approaches to capturing equity premiums for investors.
Think of it like how cameras have advanced in recent years. The advances in financial markets science are like the ability to capture images with much greater precision and clarity.
The latest research is on profitability – and how we can identify stocks with higher expected profitability in the market. In terms of investment outcomes, adding profitability considerations to existing strategies can generate a better expected return with lower volatility and greater reliability.