Expected Returns: An Investor’s Guide to Harvesting Market Rewards

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. Expected Returns provides extensive empirical evidence, surveys of risk-based and behavioral theories, and practical insights.

Table of Contents

PART I OVERVIEW, HISTORICAL RETURNS, AND ACADEMIC THEORIES.
1 Introduction.
2 Whetting the appetite: Historical averages and forward-looking returns.
3 The historical record: The past 20 years in a longer perspective.
4 Road map to terminology.
5 Rational theories on expected return determination.
6 Behavioral finance.
7 Alternative interpretations for return predictability.

PART II A DOZEN CASE STUDIES.
8 Equity risk premium.
9 Bond risk premium.
10 Credit risk premium.
11 Alternative asset premia.
12 Value-oriented equity selection.
13 Currency carry.
14 Commodity momentum and trend following.
15 Volatility selling (on equity indices).
16 Growth factor and growth premium.
17 Inflation factor and inflation premium.
18 Liquidity factor and illiquidity premium.
19 Tail risks (volatility, correlation, skewness).

PART III BACK TO BROADER THEMES.
20 Endogenous return and risk: Feedback effects on expected returns.
21 Forward-looking measures of asset returns.
22 Interpreting carry or non-zero yield spreads.
23 Survey-based subjective expected returns.
24 Tactical return forecasting models.
25 Seasonal regularities.
26 Cyclical variation in asset returns.
27 Secular trends and the next 20 years.
28 Enhancing returns through managing risks, horizon, skill, and costs.
29 Takeaways for long-horizon investors.