Horizon July 2013

This new biannual publication of Pictet Wealth Management highlights the expected returns of asset classes over the next 10 years. Two scenarios are used to conduct the calculations: with or without the hypothesis of an innovation shock over the period. In this first issue, shale oil and shale gas are taken into account in the innovation shock scenario.

Calculation methodology for 10-year average annual expected returns

Academic research strives to differentiate, by optimising as far as possible, the various risk factors that drive the returns of different asset classes. Nevertheless, a comprehensive theoretical structure has still not been erected. For our part, to conduct the calculation of 10-year expected returns of asset classes, we have developed our own risk factor based approach. The common risk factors we have identified for all asset classes are fundamental in nature, rather than market related.

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