{"product_id":"expected-returns-isbn-9781119990727","title":"Expected Returns","description":"This comprehensive reference delivers a toolkit for harvesting market rewards from a wide range of investments. Written by a world-renowned industry expert, the reference discusses how to forecast returns under different parameters. Expected returns of major asset classes, investment strategies, and the effects of underlying risk factors such as growth, inflation, liquidity, and different risk perspectives, are also explained. Judging expected returns requires balancing historical returns with both theoretical considerations and current market conditions. \u003ci\u003eExpected Returns\u003c\/i\u003e provides extensive empirical evidence, surveys of risk-based and behavioral theories, and practical insights. \u003cp\u003eForeword by Clifford Asness xi\u003c\/p\u003e \u003cp\u003eAcknowledgments xvii\u003c\/p\u003e \u003cp\u003eAbbreviations and acronyms xix\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart I Overview, Historical Returns, and Academic Theories 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Introduction 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 Historical performance 7\u003c\/p\u003e \u003cp\u003e1.2 Financial and behavioral theories: A brief history of ideas 9\u003c\/p\u003e \u003cp\u003e1.3 Forward-looking indicators 13\u003c\/p\u003e \u003cp\u003e1.4 View-based expected returns 15\u003c\/p\u003e \u003cp\u003e1.5 General comments about the book 16\u003c\/p\u003e \u003cp\u003e1.6 Notes 20\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 Whetting the appetite: Historical averages and forward-looking returns 23\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Historical performance since 1990 24\u003c\/p\u003e \u003cp\u003e2.2 Sample-specific results: Dealing with the pitfalls 27\u003c\/p\u003e \u003cp\u003e2.3 Forward-looking return indicators 32\u003c\/p\u003e \u003cp\u003e2.4 Notes 35\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 The historical record: The past 20 years in a longer perspective 37\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 Stocks 39\u003c\/p\u003e \u003cp\u003e3.2 Bonds 43\u003c\/p\u003e \u003cp\u003e3.3 Real asset investing and active investing 47\u003c\/p\u003e \u003cp\u003e3.4 FX and money markets 50\u003c\/p\u003e \u003cp\u003e3.5 Real return histories 52\u003c\/p\u003e \u003cp\u003e3.6 Notes 52\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Road map to terminology 57\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Constant or time-varying expected returns? 57\u003c\/p\u003e \u003cp\u003e4.2 Rational or irrational expectations formation? 58\u003c\/p\u003e \u003cp\u003e4.3 Return measurement issues 59\u003c\/p\u003e \u003cp\u003e4.4 Returns in what currency? 60\u003c\/p\u003e \u003cp\u003e4.5 Risk-adjusted returns 61\u003c\/p\u003e \u003cp\u003e4.6 Biased returns 63\u003c\/p\u003e \u003cp\u003e4.7 Notes 63\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 Rational theories on expected return determination 65\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 The old world 66\u003c\/p\u003e \u003cp\u003e5.2 The new world 68\u003c\/p\u003e \u003cp\u003e5.3 Detour: a brief survey of the efficient markets hypothesis 81\u003c\/p\u003e \u003cp\u003e5.4 Notes 83\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Behavioral finance 87\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Limits to arbitrage 87\u003c\/p\u003e \u003cp\u003e6.2 Psychology 89\u003c\/p\u003e \u003cp\u003e6.3 Applications 98\u003c\/p\u003e \u003cp\u003e6.4 Conclusion 106\u003c\/p\u003e \u003cp\u003e6.5 Notes 107\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Alternative interpretations for return predictability 111\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Risk premia or market inefficiency 111\u003c\/p\u003e \u003cp\u003e7.2 Data mining and other “mirage'' explanations 112\u003c\/p\u003e \u003cp\u003e7.3 Notes 115\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart II \u003c\/b\u003e\u003cb\u003eA Dozen Case Studies 117\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Equity risk premium 119\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Introduction and terminology 119\u003c\/p\u003e \u003cp\u003e8.2 Theories and the equity premium puzzle 120\u003c\/p\u003e \u003cp\u003e8.3 Historical equity premium 122\u003c\/p\u003e \u003cp\u003e8.4 Forward-looking (ex ante objective) long-term expected return measures 128\u003c\/p\u003e \u003cp\u003e8.5 Survey-based subjective expectations 141\u003c\/p\u003e \u003cp\u003e8.6 Tactical forecasting for market timing 144\u003c\/p\u003e \u003cp\u003e8.7 Notes 149\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Bond risk premium 153\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Introduction, terminology, and theories 153\u003c\/p\u003e \u003cp\u003e9.2 Historical average returns 157\u003c\/p\u003e \u003cp\u003e9.3 Alternative ex ante measures of the BRP 160\u003c\/p\u003e \u003cp\u003e9.4 Yield curve steepness: important predictive relations 161\u003c\/p\u003e \u003cp\u003e9.5 Explaining BRP behavior: first targets, then four drivers 164\u003c\/p\u003e \u003cp\u003e9.6 Tactical forecasting—duration timing 174\u003c\/p\u003e \u003cp\u003e9.7 Notes 177\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Credit risk premium 179\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Introduction, terminology, and theory 179\u003c\/p\u003e \u003cp\u003e10.2 Historical average excess returns 183\u003c\/p\u003e \u003cp\u003e10.3 Focus on front-end trading—a pocket of attractive reward to risk 188\u003c\/p\u003e \u003cp\u003e10.4 Understanding credit spreads and their drivers 191\u003c\/p\u003e \u003cp\u003e10.5 Tactical forecasting of corporate bond outperformance 198\u003c\/p\u003e \u003cp\u003e10.6 Assessing other non-government debt 199\u003c\/p\u003e \u003cp\u003e10.7 Concluding remarks 204\u003c\/p\u003e \u003cp\u003e10.8 Notes 205\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Alternative asset premia 207\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 Introduction to alternatives 207\u003c\/p\u003e \u003cp\u003e11.2 Real estate 210\u003c\/p\u003e \u003cp\u003e11.3 Commodities 219\u003c\/p\u003e \u003cp\u003e11.4 Hedge funds 226\u003c\/p\u003e \u003cp\u003e11.5 Private equity funds 241\u003c\/p\u003e \u003cp\u003e11.6 Notes 245\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Value-oriented equity selection 249\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Introduction to dynamic strategies 249\u003c\/p\u003e \u003cp\u003e12.2 Equity value: introduction and historical performance 251\u003c\/p\u003e \u003cp\u003e12.3 Tweaks including style timing 258\u003c\/p\u003e \u003cp\u003e12.4 The reasons value works 261\u003c\/p\u003e \u003cp\u003e12.5 Does the value strategy work in equities beyond individual stock selection or in market or sector selection in other asset classes? 265\u003c\/p\u003e \u003cp\u003e12.6 Relations between value and other indicators for equity selection 267\u003c\/p\u003e \u003cp\u003e12.7 Notes 268\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 Currency carry 271\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e13.1 Introduction 271\u003c\/p\u003e \u003cp\u003e13.2 Historical average returns 272\u003c\/p\u003e \u003cp\u003e13.3 Improvements\/refinements to the baseline carry strategy 276\u003c\/p\u003e \u003cp\u003e13.4 Why do carry strategies work? 282\u003c\/p\u003e \u003cp\u003e13.5 Carry here, carry there, carry everywhere 288\u003c\/p\u003e \u003cp\u003e13.6 Notes 290\u003c\/p\u003e \u003cp\u003e\u003cb\u003e14 Commodity momentum and trend following 293\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e14.1 Introduction 293\u003c\/p\u003e \u003cp\u003e14.2 Performance of simple commodity momentum strategies 294\u003c\/p\u003e \u003cp\u003e14.3 Tweaks 298\u003c\/p\u003e \u003cp\u003e14.4 Why does momentum—such a naive strategy—work? 299\u003c\/p\u003e \u003cp\u003e14.5 Momentum in other asset classes 301\u003c\/p\u003e \u003cp\u003e14.6 Notes 305\u003c\/p\u003e \u003cp\u003e\u003cb\u003e15 Volatility selling (on equity indices) 307\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e15.1 Introduction 307\u003c\/p\u003e \u003cp\u003e15.2 Historical performance of volatility-trading strategies 311\u003c\/p\u003e \u003cp\u003e15.3 Tweaks\/Refinements 314\u003c\/p\u003e \u003cp\u003e15.4 The reasons volatility selling is profitable 315\u003c\/p\u003e \u003cp\u003e15.5 Other assets 319\u003c\/p\u003e \u003cp\u003e15.6 Notes 319\u003c\/p\u003e \u003cp\u003e\u003cb\u003e16 Growth factor and growth premium 321\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e16.1 Introduction to underlying factors in Chapters 16–19 321\u003c\/p\u003e \u003cp\u003e16.2 Introduction to the growth factor 327\u003c\/p\u003e \u003cp\u003e16.3 Theory and evidence on growth 328\u003c\/p\u003e \u003cp\u003e16.4 Asset market relations 331\u003c\/p\u003e \u003cp\u003e16.5 Time-varying growth premium 338\u003c\/p\u003e \u003cp\u003e16.6 Notes 338\u003c\/p\u003e \u003cp\u003e\u003cb\u003e17 Inflation factor and inflation premium 341\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e17.1 Introduction 341\u003c\/p\u003e \u003cp\u003e17.2 Inflation process—history, determinants, expectations 345\u003c\/p\u003e \u003cp\u003e17.3 Inflation sensitivity of major asset classes and the inflation premium 350\u003c\/p\u003e \u003cp\u003e17.4 Time-varying inflation premium 356\u003c\/p\u003e \u003cp\u003e17.5 Notes 356\u003c\/p\u003e \u003cp\u003e\u003cb\u003e18 Liquidity factor and illiquidity premium 359\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e18.1 Introduction 359\u003c\/p\u003e \u003cp\u003e18.2 Factor history: how does liquidity itself vary over time? 362\u003c\/p\u003e \u003cp\u003e18.3 Historical evidence on average liquidity-related premia 365\u003c\/p\u003e \u003cp\u003e18.4 Time-varying illiquidity premia 370\u003c\/p\u003e \u003cp\u003e18.5 Note 374\u003c\/p\u003e \u003cp\u003e\u003cb\u003e19 Tail risks (volatility, correlation, skewness) 375\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e19.1 Introduction 375\u003c\/p\u003e \u003cp\u003e19.2 Factor history 378\u003c\/p\u003e \u003cp\u003e19.3 Historical evidence on average asset returns vs. volatility and correlation 380\u003c\/p\u003e \u003cp\u003e19.4 Theory and evidence on the skewness premium 389\u003c\/p\u003e \u003cp\u003e19.5 Verdict on why high-volatility assets fare so poorly 392\u003c\/p\u003e \u003cp\u003e19.6 Time-varying premia for tail risk exposures 395\u003c\/p\u003e \u003cp\u003e19.7 Notes 396\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart III Back to Broader Themes 399\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e20 Endogenous return and risk: Feedback effects on expected returns 401\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e20.1 Feedback loops on the direction of risky assets 401\u003c\/p\u003e \u003cp\u003e20.2 Feedback loops on less directional positions 403\u003c\/p\u003e \u003cp\u003e20.3 Agenda for market timers and researchers 405\u003c\/p\u003e \u003cp\u003e20.4 Notes 407\u003c\/p\u003e \u003cp\u003e\u003cb\u003e21 Forward-looking measures of asset returns 409\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e21.1 Popular value and carry indicators and their pitfalls 410\u003c\/p\u003e \u003cp\u003e21.2 Building blocks of expected returns 413\u003c\/p\u003e \u003cp\u003e21.3 Notes 416\u003c\/p\u003e \u003cp\u003e\u003cb\u003e22 Interpreting carry or non-zero yield spreads 419\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e22.1 Introduction 419\u003c\/p\u003e \u003cp\u003e22.2 Future excess returns or market expectations? 420\u003c\/p\u003e \u003cp\u003e22.3 Empirical horse races for various assets 424\u003c\/p\u003e \u003cp\u003e22.4 Conclusions 428\u003c\/p\u003e \u003cp\u003e22.5 Notes 429\u003c\/p\u003e \u003cp\u003e\u003cb\u003e23 Survey-based subjective expected returns 431\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e23.1 Notes 435\u003c\/p\u003e \u003cp\u003e\u003cb\u003e24 Tactical return forecasting models 437\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e24.1 Introduction 437\u003c\/p\u003e \u003cp\u003e24.2 What type of model? 438\u003c\/p\u003e \u003cp\u003e24.3 Which assets\/trades? 441\u003c\/p\u003e \u003cp\u003e24.4 Which indicator types? 442\u003c\/p\u003e \u003cp\u003e24.5 Enhancements and pitfalls 443\u003c\/p\u003e \u003cp\u003e24.6 Notes 444\u003c\/p\u003e \u003cp\u003e\u003cb\u003e25 Seasonal regularities 445\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e25.1 Seasonal, cyclical, and secular patterns in asset returns 445\u003c\/p\u003e \u003cp\u003e25.2 Monthly seasonals and the January effect 446\u003c\/p\u003e \u003cp\u003e25.3 Other seasonals 453\u003c\/p\u003e \u003cp\u003e\u003cb\u003e26 Cyclical variation in asset returns 457\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e26.1 Typical behavior of realized returns and ex ante indicators through the business cycle 458\u003c\/p\u003e \u003cp\u003e26.2 Typical behavior of realized returns and ex ante indicators across different economic regimes 461\u003c\/p\u003e \u003cp\u003e26.3 Notes 465\u003c\/p\u003e \u003cp\u003e\u003cb\u003e27 Secular trends and the next 20 years 467\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e27.1 Contrasting 1988–2007 with 1968–1987 467\u003c\/p\u003e \u003cp\u003e27.2 Reversible and sustainable secular trends 468\u003c\/p\u003e \u003cp\u003e27.3 The next 20 years 474\u003c\/p\u003e \u003cp\u003e27.4 Notes 478\u003c\/p\u003e \u003cp\u003e\u003cb\u003e28 Enhancing returns through managing risks, horizon, skill, and costs 479\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e28.1 Introduction: how can investors enhance returns? 479\u003c\/p\u003e \u003cp\u003e28.2 Risk 482\u003c\/p\u003e \u003cp\u003e28.3 Investment horizon 492\u003c\/p\u003e \u003cp\u003e28.4 Skill 496\u003c\/p\u003e \u003cp\u003e28.5 Costs 499\u003c\/p\u003e \u003cp\u003e28.6 Notes 501\u003c\/p\u003e \u003cp\u003e\u003cb\u003e29 Takeaways for long-horizon investors 503\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e29.1 Key takeaways from theory 504\u003c\/p\u003e \u003cp\u003e29.2 Empirical return sources 504\u003c\/p\u003e \u003cp\u003e29.3 My take on key debates 506\u003c\/p\u003e \u003cp\u003e29.4 Know thyself: large long-horizon investors’ natural edges 512\u003c\/p\u003e \u003cp\u003e29.5 Institutional practices 513\u003c\/p\u003e \u003cp\u003e29.6 Notes 514\u003c\/p\u003e \u003cp\u003eAppendices 515\u003c\/p\u003e \u003cp\u003eA World wealth 515\u003c\/p\u003e \u003cp\u003eA.1 Global total 516\u003c\/p\u003e \u003cp\u003eA.2 Asset class detail 516\u003c\/p\u003e \u003cp\u003eA.3 Notes 518\u003c\/p\u003e \u003cp\u003eB Data sources and data series construction 519\u003c\/p\u003e \u003cp\u003eB.1 Asset class and sector returns 519\u003c\/p\u003e \u003cp\u003eB.2 Strategy style returns 521\u003c\/p\u003e \u003cp\u003eB.3 Factor proxies 522\u003c\/p\u003e \u003cp\u003eB.4 Forward-looking yields and spreads 523\u003c\/p\u003e \u003cp\u003eB.5 Survey data and expected inflation 523\u003c\/p\u003e \u003cp\u003eB.6 Miscellaneous other 524\u003c\/p\u003e \u003cp\u003eBibliography 527\u003c\/p\u003e \u003cp\u003eIndex 551\u003c\/p\u003e \"Every investor will find something of value in this book\" (Professional Investor, October 2015) \u003cp\u003e\u003cb\u003eAntti Ilmanen\u003c\/b\u003e is a Principal at AQR Capital Management, a leading global investment-management firm. Since starting as a central bank portfolio manager in Finland in 1986, Antti has worn many hats to bridge academic finance and practitioner investing. Having earned a finance PhD in 1994 from the University of Chicago Graduate School of Business, he spent a decade at Salomon Brothers\/Citigroup as a bond researcher, strategist, managing director and a trader. Before joining Brevan Howard in 2004, Antti had published extensively in finance and investment journals and had received a Graham \u0026amp; Dodd scroll and the Bernstein Fabozzi\/Jacobs Levy award for his articles. Over the years, Antti has advised many institutional investors, most regularly Norway's Government Pension Fund Global on its long-run investment strategy.\u003c\/p\u003e  \u003ci\u003eExpected Returns\u003c\/i\u003e is a one-stop reference that gives investors a comprehensive toolkit for harvesting market rewards from a wide range of investments. Written by an experienced portfolio manager, scholar, strategist, investment advisor and hedge fund trader, this book challenges investors to broaden their minds from a too-narrow asset class perspective and excessive focus on historical performance. Coverage includes major asset classes (stocks, bonds, alternatives), investment strategies (value, carry, momentum, volatility) and the effects of underlying risk factors (growth, inflation, illiquidity, tail risks). Judging expected returns requires balancing historical returns with both theoretical considerations and current market conditions. \u003ci\u003eExpected Returns\u003c\/i\u003e summarizes the state of knowledge on all of these topics, providing extensive empirical evidence, surveys of risk-based and behavioral theories, and practical insights.  \u003cp\u003e\"This is the best book on active management ever written - and it achieves that status without mentioning a single stock or bond by name. Anyone who performs the rigorous analysis Ilmanen describes - admittedly a neat trick, since the world's most sophisticated investors struggle to do it successfully - will beat the market.\"\u003cbr\u003e —\u003cb\u003eLaurence B. Siegel, Former Director of Research, The Ford Foundation\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"Antti Ilmanen shows the way forward for the investment management profession in this remarkable book. In a comprehensive and impressive way, he combines financial theory, historical performance data and forward-looking indicators, into a consistent framework for assessing expected returns and risk. His approach is both scientific and practical, based on decades of studies and his own trading experience. With a touch of personal wisdom and humility, Ilmanen's book is a fascinating and educational journey into the future of investment management.\"\u003cbr\u003e —\u003cb\u003eKnut N. Kjaer, Founding CEO of the Norwegian Government Pension Fund\/NBIM and former president of RiskMetrics Group\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"Ilmanen's wonderful book manages to be exquisitely readable while covering just about every aspect of the investment process. Filled with many, many fresh and useful insights. This volume deserves to be read and then kept close at hand - because it is sure to be needed again and again.\"\u003cbr\u003e —\u003cb\u003eMartin L. Leibowitz, Managing Director, Morgan Stanley, and former CIO, TIAA-CREF\u003c\/b\u003e\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989185085669,"sku":"NP9781119990727","price":89.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781119990727.jpg?v=1761783129","url":"https:\/\/k12savings.com\/products\/expected-returns-isbn-9781119990727","provider":"K12savings","version":"1.0","type":"link"}