Bogleheads On Investing Podcast Episode 88, Antti Ilmanen, Ph.D., talks about how investors form long-run return expectations, Rick Ferri host
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Nov 28, 2025 Antti Ilmanen, Ph.D., Principal at AQR Capital and expert on asset valuation, discusses how investors form long-run return expectations. He contrasts market-based, objective forecasts with subjective beliefs, highlighting the implications of bullish sentiment during low expected returns. Antti analyzes U.S. equity dominance and the impact of valuation shifts, while emphasizing the importance of simplicity in portfolios. He warns against overcomplicating investments, discussing reasons behind elevated earnings growth and the dynamics of bond expectations.
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Fama's Paper Toss Moment
- Antti recounts asking Eugene Fama about survey data and seeing Fama toss a paper into the waste bin.
- That experience pushed Antti to revisit and promote survey-based investor expectations later.
U.S. Outperformance Largely Valuation-Driven
- Much of recent U.S. outperformance came from rising relative valuations rather than fundamental growth.
- Historical U.S. growth advantage exists but recent excess may be temporary and vulnerable to mean reversion.
Why Bonds Behave Differently Than Stocks
- Bond investors form mean-reverting expectations and quote yields, leading to contrarian forecasts.
- Equity investors quote prices and returns, encouraging extrapolation and optimism.
