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Journal Article
Investing in Interesting Times
January 31, 2023
Given 2022’s cheapening of asset valuations, some have questioned if we are still in a world of low expected returns. We review what’s changed after 2022, showing that the lower expected return picture has not been substantially altered for many asset classes. We provide some suggestions to potentially ameliorate the pain caused by this environment.
Quick Takes
Quick Clips: 2023 Capital Market Assumptions for Major Asset Classes
January 27, 2023
Hear from Pete Hecht and Thomas Maloney as they provide short soundbytes based on our Q1 2023 Capital Market Assumptions for Major Asset Classes
Alternative Thinking
2023 Capital Market Assumptions for Major Asset Classes
1Q 2023
We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also include two special topics: one highlighting the case for emerging market equities, and the other assessing the impact of large interest rate rises on various risk premia.
Quick Takes
Quick Clips: 2022 Capital Market Assumptions for Major Asset Classes
January 27, 2022
Performance of traditional stock/bond portfolios has been remarkable over the last decade, but the current outlook is more subdued. Hear from AQR’s Portfolio Solutions Group on some practical, incremental changes that could boost expected returns without adding substantial risk.
Alternative Thinking
2021 Capital Market Assumptions for Major Asset Classes
Q1 2021
We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also discuss what investors should expect from the stock-bond correlation in the coming decade.
Alternative Thinking
Fire and Ice: Confronting the Twin Perils of Inflation and Deflation
Q4 2020
The COVID-19 pandemic and the responses to it by governments, central banks and consumers have unleashed both disinflationary and inflationary forces, but we do not know which forces will win over the longer term. We explore the historical inflation sensitivities of a range of different investments and present the benefits of both risk-balanced asset allocations and dynamic directional strategies to prepare for uncertain times.
Alternative Thinking
Was That Intentional? Ways to Improve Your Active Risk
September 28, 2020
Investors try to outperform their strategic asset allocation benchmarks by taking active risks. Some of these are intentional, but others are low-conviction or even unintentional, which can be a large part of a portfolio’s total active risk. When it comes to beating a strategic asset allocation benchmark, reducing these unintentional active risks may among the clearest sources of “low hanging fruit”.
Working Paper
Biases in Long-Horizon Predictive Regressions
June 4, 2020
This paper derives the small sample bias of estimators in J horizon predictive regressions, providing a plug-in adjustment for these estimators. A number of surprising results emerge, including a higher bias for overlapping than nonoverlapping regressions despite the greater number of observations and particularly higher bias for an alternative long-horizon predictive regression commonly advocated for in the literature.
Alternative Thinking
2020 Capital Market Assumptions for Major Asset Classes (Supplemental Estimates as of March 31, 2020)
May 6, 2020
This supplement provides a special update to our estimates of medium-term (5- to 10-year) expected returns for major asset classes. This update reflects the large changes in prices for many asset classes due to the impact of COVID-19 in Q1 2020.
Alternative Thinking
2020 Capital Market Assumptions for Major Asset Classes
January 29, 2020
We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes, and introduce a method for quantifying the expected return on cash.