Equity Market Focus: Subjective Expected Returns

AQR

Antti Ilmanen

Research

16 Pages

Antti Ilmanen examines how subjective expected equity returns differ from model based estimates built from valuations and fundamentals. He compares surveys across investors and asset classes to see who extrapolates past performance and who stays anchored in required returns. 

Date published: August 21 2025

As of August 21, 2025. Past performance is not an indicator of future results.

Key Takeaways

Subjective belief cycles: Surveys show expected returns rise after strong markets and fall after weak markets.
Investor type differences: Retail and analyst expectations chase trends while institutions and bond investors lean more contrarian.
Portfolio implications: Gaps between beliefs and required returns help explain bubbles, value premia, and disappointing realized outcomes.
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