This is a one stop reference for measuring the expected returns of long term investments. Written by a practitioner with years of hands-on experience in the industry, it is a comprehensive toolkit which enables practitioners to forecast the returns of a range of investments under different parameters. Coverage includes expected returns of major asset classes (stocks, bonds, alternatives), investment strategies (value, carry, momentum) and the effects of underlying factors such as growth, inflation, liquidity and different risk perspectives. The book also looks at rational and irrational perspectives on asset returns, comparing traditional theories such as efficient markets with irrational or behavioral perspectives, and provides real life case studies to illustrate how returns have been miscalculated to the detriment of the investor. In all, this book will be a bible to the long-term investor, providing a range of expected return scenarios, and providing a platform for forecasting the expected returns of an investment portfolio for asset allocation and portfolio balancing purposes. Part I – Getting Started Introduction/Overview Appetizer: Interesting Historical Returns and Their Pitfalls Road Map to Definitions/Terminology Rational Theories on Expected Return Determination Behavioural Explanations for Expected Returns Equity Risk Premium Bond Risk Premium Credit Risk Premium Alternative Asset Premia Part II Case Studies Equity Risk Premium Bond Risk Premium Credit Risk Premium Alternative Asset Premia Value (Equity Long-Short) Carry (Currency) Momentum and Trend (Commodities) Volatility Selling (Equity Index) Growth Inflation Liquidity Higher Moments (volatility, correlation, skew) Part 3 – More on Time-varying Expected Returns and Managing Them Alternative Interpretations for Return Predictability Endogenous Return and Risk – overlaying feedback effects on all return sources Forward-looking Measures of Asset Returns (value and carry) Interpreting Carry (non-zero yield spreads) Survey-based Subjective Return Expectations Tactical Return Forecasting Models Enhancing Expected Returns Through Managing Risks, Horizon, Skill, and Costs Seasonal Regularities Cyclical Variation in Asset Returns The Historical Record – Past 20 Years Within a Longer Perspective Secular Trends, Recent Crisis, and the Next 20 Years Takeaways for Long-Horizon Investors
Book Details:
- Author: Antti Ilmanen
- ISBN: 9781118467190
- Year Published: 2011
- Pages: 584
- BISAC: BUS036000, BUSINESS & ECONOMICS/Investments & Securities / General
About the Book and Topic:
This is a one stop reference for measuring the expected returns of long term investments. Written by a practitioner with years of hands-on experience in the industry, it is a comprehensive toolkit which enables practitioners to forecast the returns of a range of investments under different parameters. Coverage includes expected returns of major asset classes (stocks, bonds, alternatives), investment strategies (value, carry, momentum) and the effects of underlying factors such as growth, inflation, liquidity and different risk perspectives. The book also looks at rational and irrational perspectives on asset returns, comparing traditional theories such as efficient markets with irrational or behavioral perspectives, and provides real life case studies to illustrate how returns have been miscalculated to the detriment of the investor. In all, this book will be a bible to the long-term investor, providing a range of expected return scenarios, and providing a platform for forecasting the expected returns of an investment portfolio for asset allocation and portfolio balancing purposes. Part I – Getting Started Introduction/Overview Appetizer: Interesting Historical Returns and Their Pitfalls Road Map to Definitions/Terminology Rational Theories on Expected Return Determination Behavioural Explanations for Expected Returns Equity Risk Premium Bond Risk Premium Credit Risk Premium Alternative Asset Premia Part II Case Studies Equity Risk Premium Bond Risk Premium Credit Risk Premium Alternative Asset Premia Value (Equity Long-Short) Carry (Currency) Momentum and Trend (Commodities) Volatility Selling (Equity Index) Growth Inflation Liquidity Higher Moments (volatility, correlation, skew) Part 3 – More on Time-varying Expected Returns and Managing Them Alternative Interpretations for Return Predictability Endogenous Return and Risk – overlaying feedback effects on all return sources Forward-looking Measures of Asset Returns (value and carry) Interpreting Carry (non-zero yield spreads) Survey-based Subjective Return Expectations Tactical Return Forecasting Models Enhancing Expected Returns Through Managing Risks, Horizon, Skill, and Costs Seasonal Regularities Cyclical Variation in Asset Returns The Historical Record – Past 20 Years Within a Longer Perspective Secular Trends, Recent Crisis, and the Next 20 Years Takeaways for Long-Horizon Investors
Expected return refers to the estimation of the value of an investment, including the change in price and any payments or dividends, calculated from a probability distribution curve of all possible rates of return. In general, if an asset is risky, the expected return will be the risk-free rate of return plus a certain risk premium.
RESPECTED AUTHOR Ilmanen is widely respected around the world for his research, and has won numerous international awards for his papers and contributions. TOPICAL reflects the need for better and more informed forecasting methodologies from long term investors. CASE STUDIES 12 real world case studies illustrate the key expected return examples illustrated in the book, and how forecasting can go badly wrong.
About the Author
Antti Ilmanen 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 & 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.