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Alternative Thinking
Why Do Most Investors Choose Concentration Over Leverage?
2Q 2012
Return-seeking investors must take risks—the question is which to take and to understand the tradeoffs involved. Most investors choose concentration risk, but we present arguments for a different approach.
Alternative Thinking
2014 Capital Market Assumptions for Major Asset Classes
1Q 2014
We present our capital market assumptions for major asset classes and explore justifiable frameworks for estimating multi-year expected returns.
Alternative Thinking
Strategic Portfolio Construction
2Q 2015
When it comes to portfolio construction, many investors seek guidance on “putting it all together.” We discuss our systematic approach and examine how investor-specific beliefs and constraints can inform and interact with formal optimization methods.
Alternative Thinking
Strategic Risk Allocation
2Q 2014
We believe investors should broadly diversify and risk balance as a starting point to asset allocation, but perhaps then mildly overweight assets with high Sharpe ratios or good diversification benefits if they can identify these.
Alternative Thinking
Mapping Investable Return Sources to Macro Environments
4Q 2013
We explore the empirical relationships between investable strategies (asset classes and style premia) and macroeconomic environments. We find that style premia have meaningfully less macro exposure than do asset classes
Alternative Thinking
2016 Capital Market Assumptions for Major Asset Classes
1Q 2016
We update our multi-year expected return assumptions for major stock and bond markets, and investigate expected returns for credits and commodities.
Alternative Thinking
2015 Capital Market Assumptions for Major Asset Classes
1Q 2015
We update our expected returns and review our framework for constructing estimates of long-term expected returns for major asset classes, among other things.
Alternative Thinking
2017 Capital Market Assumptions For Major Asset Classes
1Q 2017
We update our multi-year expected return assumptions for major stock and bond markets. Compared with historical averages of value metrics, we beloieve we are in a low expected return environment.
Alternative Thinking
Capital Market Assumptions for Major Asset Classes
February 2, 2018
We update our medium-term expected returns for major asset classes and explore the historical accuracy of yield-based return estimates.
Journal Article
Expected Returns on Stocks and Bonds
December 1, 2003
The equity-bond risk premium — the long-run expected return advantage of stocks over government bonds — is one of the biggest questions in financial markets.