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This article offers some insight into determining long-term expected returns on “risk-free” assets which are then used as a basis for risky asset forecasts and strategic allocations. It first examines the notion of “risk-free” assets in themselves in order to demonstrate that, even if regularly renewed short-term investment does present some relevant characteristics, there is in fact no such thing over the long term. It then analyses the impact of different economic and financial theories on short-rate forecasts and includes a series of tests over a long-term period from 1930 to 2013 in the United States...
Sylvie de LAGUICHE
Head of Quantitative Research at Amundi