While data remains an essential tool for dealing with uncertainty, he warns that false precision, biases and increasing overconfidence are distorting investment decisions – especially at a time when investors feel more informed than ever.Damodaran’s data update – an exercise he has conducted since the early 1990s – brings together publicly available financial and market data on more than 48,000 listed companies worldwide. What started as a modest data set in 1994 has grown into one of the most widely used global valuation sources, covering sector averages, equity risk premia, default spreads, margins, returns and valuation multiples across regions and sectors.
The central theme of this year’s release is not scale, but restraint. “Putting numbers to uncertainty can provide comfort,” Damodaran said, “but it can also discourage investors from treating estimates as facts.”
Damodaran gave an example with equity risk premia, where long-term averages mask wide margins of error that materially affect valuation results. He argued that ignoring uncertainty while relying too heavily on point estimates.
However, the recurring concern in the update is both conscious and unconscious. He also challenged the assumption that academic or quantitative analysis is inherently objective, pointing out that incentives shape behavior in markets, research, and policy. “Data selection itself can reflect bias, whether it is handpicked statistics or reliance on known historical patterns that may no longer hold.”
He is especially critical of what he calls “lazy, mean reversal”: the belief that valuation multiples or market behavior will inevitably return to historical norms. While such assumptions often work, they can fail dramatically during structural shifts, causing investors to misjudge risk in rapidly changing industries or regions.
The update also counters the growing tendency among analysts to outsource responsibility to data. “The data did it” is no excuse, Damodaran argued, for recommendations that ignore judgment, context or responsibility. Figures do not absolve analysts of their responsibility for their conclusions.
From a market perspective, the data paints a mixed global picture for 2025. Global equities added $26.3 trillion in market capitalization, up 21.46% over the year. The US continued to dominate with a market value of almost $70 trillion, although its share of global markets fell slightly. China emerged as the best-performing major region in dollar terms, while India lagged behind with modest gains.
“Technology remained the largest sector globally, accounting for almost 22% of market capitalization, followed by financial services and industrials. However, sector performance varied widely, underscoring Damodaran’s argument that broad averages often hide critical differences beneath the surface,” he wrote.
Looking ahead, Damodaran sees artificial intelligence as both a threat and a reckoning. He acknowledged that AI can already outperform humans in mechanical data processing, including tasks he traditionally performs himself. Over time, he expected AI to take over much of his own data compilation work.
The implication for investors and data-driven companies is that competitive advantage does not come from access to data alone. It will come from interpretation, judgment and the ability to combine numbers with qualities that cannot easily be automated.
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