How to Think About Expected Returns

June 16, 2014

When investors think about expected returns on their capital — that is, how much they are likely to earn depending on the risk they take, the assets they buy and the strategies they use — it is important to focus on the long term. In this video, AQR Principal Antti Ilmanen, author of the highly praised book Expected Returns (Wiley 2012), also lays out the three pillars on which he believes investors should build their expectations: historical average returns, financial theories about risk and behavior, and current market conditions.

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