Estimating Long-Term Expected Returns

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aut.relation.endpage154
aut.relation.issue4
aut.relation.journalFinancial Analysts Journal
aut.relation.startpage134
aut.relation.volume80
dc.contributor.authorMa, R
dc.contributor.authorMarshall, BR
dc.contributor.authorNguyen, NH
dc.contributor.authorVisaltanachoti, N
dc.date.accessioned2024-11-12T00:10:50Z
dc.date.available2024-11-12T00:10:50Z
dc.date.issued2024-06-13
dc.description.abstractEstimating long-term expected returns as accurately as possible is of critical importance. Researchers typically base their estimates on yield and growth, valuation, or a combined yield, growth, and valuation (“three-component”) framework. We run a horse race of the abilities of different frameworks and input proxies within each framework to estimate 10- and 20-year out-of-sample returns. The three-component model based on the TRCAPE valuation proxy outperforms estimates based on historical mean benchmark returns, with mean square error improvements exceeding 30%. Using this approach in asset allocation decisions results in an improvement in Sharpe ratios of more than 50%.
dc.identifier.citationFinancial Analysts Journal, ISSN: 0015-198X (Print); 1938-3312 (Online), Taylor and Francis Group, 80(4), 134-154. doi: 10.1080/0015198X.2024.2358737
dc.identifier.doi10.1080/0015198X.2024.2358737
dc.identifier.issn0015-198X
dc.identifier.issn1938-3312
dc.identifier.urihttp://hdl.handle.net/10292/18279
dc.languageen
dc.publisherTaylor and Francis Group
dc.relation.urihttps://www.tandfonline.com/doi/full/10.1080/0015198X.2024.2358737
dc.rights© 2024 The Author(s). Published with license by Taylor & Francis Group, LLC. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.
dc.rights.accessrightsOpenAccess
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/
dc.subject3502 Banking, Finance and Investment
dc.subject35 Commerce, Management, Tourism and Services
dc.subject1501 Accounting, Auditing and Accountability
dc.subject1502 Banking, Finance and Investment
dc.subjectFinance
dc.subject3501 Accounting, auditing and accountability
dc.subject3502 Banking, finance and investment
dc.titleEstimating Long-Term Expected Returns
dc.typeJournal Article
pubs.elements-id558051
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