Bogleheads On Investing Podcast · bogleheads

Episode 88, Antti Ilmanen, Ph.D., talks about how investors form long-run return expectations, Rick Ferri host

November 28, 2025·1 hr 1 min·5 clips

In 2000, objective returns were low but investors were wildly bullish.

Episode 88 stays technical, but the thread is easy to follow. Rick builds the conversation around Antti's AQR paper series on how investors form long run return expectations. By the end, they have worked through all ten parts, with the papers available at AQR. The cleanest contrast is between bonds and equities. Antti says bond investors are pushed toward the future because they quote yields, not just recent price moves. When rates are unusually low, they tend to expect higher future rates. When rates are higher, expectations can soften. Mean reversion is doing a lot of work there. The catch is history. The long slide in yields surprised virtually everybody, even when normalization seemed sensible for years. A reasonable forecast can look wrong for a long time before the market finally turns, as it did after 2022. Equities pull investors in another direction. Antti ties that to salience, the thing people notice first when they think about an asset class. Yields point forward. Stock talk often starts with prices and trailing performance, over the last year or last five years, so extrapolation creeps in. The practical message is plain enough: pick an investing path you can actually stay with, because bailing out at the wrong time can do the damage.

As heard by us

A careful look at how bond and equity investors form long-run return expectations.

This episode looks at how investors set long-run return expectations, using the guest's series of papers as the main thread. It moves from recent yield history to the habits behind forecasting, especially the split between bond investors, who tend to talk in forward-looking…

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If you want a cleaner way to think about long-run return expectations, start here.

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