To calculate the overall star rating and percentage breakdown by star, we don’t use a simple average. Instead, our system considers things like how recent a review is and if the reviewer bought the item on Amazon. It also analyzes reviews to verify trustworthiness.
The author Antti Ilmanen has completed a truly monumental task - compiling his knowledge about return expectations from years as a highly respected investment strategist on Wall Street with his expert knowledge of academic finance research. After starting at the Finnish Central Bank as a fixed income fund mamanger and asset allocation professional, he fulfilled his desire to pursue finance research full time with a PhD in Finance at the University Chicago's GSB. Having published his PhD thesis in the Journal of Finance, he joined Salomon Brothers as a global fixed income strategist at first in New York and subsequently in both London & Frankfurt. He is currently at a well-known major hedge fund in London. Despite his passion for the Chicago brand of finance, he has never lost sight of his conviction that asset returns vary through time, not the least because expected returns are changing when passing through the stages of business cycles - which makes them partially predictable. Therefore, rather than engaging in a windmill fight about efficient markets, he has strived to understand what economic forces are driving these changes, and with what kind of strategies that knowledge can be utilized to manage money. His brand new book is the result of that long and very succesful pursuit. The foreword by AQR's Cliff Asness will give you also some humorous aspects of Antti's passion to improve his and our knowledge as I could never convey it. And I agree with Cliff that it is your loss, if you don't take the time to read this book, especially if you are interested in a broad spectrum of asset classes to invest in: the author goes beyond global bonds and equities to include commodities, private equity, hedge funds and real estate. The book is now available in the US, and I am recommending it highly!
It would be fair to say that this book contains all that is presently known about expected returns. Expected returns represent the central question for any investor, making this book a cornerstone for practitioner and academic alike.
There are many strengths; firstly the book is bang up to date with the latest literature, including commentary on the 2007/ 08 credit crunch. Secondly it covers all asset classes ranging from stock, bonds through to alternatives. Thirdly it is as international as the literature enables, there is still a massive bias to the US but this is inevitable given that this is where almost all the research is carried out. Finally the author has an unwavering grasp of the subject and is an authority in this area.
It must be emphasised however that the book is really a textbook in nature and is heavy going from page 1. Expect to have to read it several times and keep referring back to it. It is not a light read and does presume some prior knowledge. If you do not have a degree from business school you may be better off starting on an easier book because you are unlikely to understand more than half of the content.
Overall it is an impressive feat of scholarship and a massive contribution to this area of study.
Ilmanen promises much in the introduction and to large extent he delivers. The work will prove to be a worthwhile reference book for any multi-asset professional investor and possibly beyond. The book provides a valuable collection of long term historic return data across numerous asset and sub-asset classes. Ilmanen's provides insight to interpreting these as well as assessing the robustness and reliability of the data. He continually highlights the value of assets which have low or negative correlations but stresses that the value of these assets depend upon the correlations remaining robust during times of market distress. Tucked away within the book are some key answers to some burning issues, for example Ilmanen considers the appropriate asset class for periods of climbing inflation - this alone should justify buying the book.
However, the work is not without its faults. Ilmanen introduces some ponderous 'visual aids' (the cube & elephant). Neither is visually appealing nor helpful to the reader. Dropping them would improve the clarity of the book.
This book is a phenomenal tour-de-force of academic research into the financial markets over the last several decades. It provides a highly readable, well researched, concise survey of the field. Beyond this, the author gives credence to academia by providing his own independent analysis to verify the existence of risk premia along the way. His methodology, data sources, and citations are heavily documented in the back of the book so you are free to reproduce his results yourself. Beyond this, he provides a few chapters that tie together the various conclusions made through the text in a way that is actionable for investors. Thankfully he is not *too* specific, so I am cautiously optimistic that the elbow grease necessary to "harvest" these alternative sources of beta will be a sufficient barrier so as to keep them from being burned into the market's memory for the time being.
That said, another book recently published, "Jackass Investing", provides a more down-to-earth analysis of the risk premia laid out in Expected Returns, and also includes more specifics on how to harvest these premia. For those who have a hard time parsing this book and it's copious amount of analysis, and just want to "cut to the chase", Jackass Investing might be a suitable alternative if you are willing to make a few leaps of faith on the author's conclusions.
There really isn't anything like this book around which is why it is so remarkable. Ilmanen starts with a review yet very practicioner oriented review of credit risk, bond risk, and equity risk premia before delving into detailed yet readable analyses of return strategies, why they work, how their success is dependent upon states of the world (ie, carry trading has a great sharpe but doesn't help you in a leverage unwind when your equity book is blowing up to) and how blending these strategies and approaches can materially improve returns and more importantly, reduce risk. It is this overlay of styles, asset classes and risk factors creating a multidimensional approach to sources of returns and risk that makes it truly unique.
I say all this as someone who does equities/credit/EM for a living and thus isn't a career systematic macro trader. For people like me this book is invaluable because it allows a more nuanced view of risk factors and sources of returns in an alpha oriented book that can easily become quite concentrated in ways that are not obvious at first. There is so much more to delve into with regards to integrating this into my work but suffice to say it is a small price to pay to learn some of the nuts and bolts of what allows Brevan Howard to manage risk so well.
Book, in my opinion, has some information value because it lists a lot of historic academic references. On the other hand it doesn't show influence of recent news and events on stock price. Expected return is a dynamical variable like BA stock showed. COVD in February/March general opinion accumulation and influence on the market is an example where accumulation events must be taken into consideration when thresholds are computed in real time.
Ilmanen has done a phenomenal job documenting the behavior of various asset classes and factors over an extended period of time. This is the only book in my knowledge that focuses on expected returns, which in itself makes the book very valuable. The author keeps mathematical detail to a minimum. I also enjoyed the foreword by Cliff Asness. This is overall a great book to further one's understanding of asset classes and risk premia, which (to my mind) should be read in conjunction with "Asset Management: A Systematic Approach to Factor Investing" by A. Ang.
This is by far the best book on investing that I've ever read. I would also say it is the best finance book I've ever read. It may sound insane, but I think that I learned as much as I did reading this book as I did taking six finance courses in college. This book is an absolute must read for any active investor and for many finance professionals as well. I have ordered three copies so far and am forcing my friends and coworkers to read it.