Long-term capital market assumptions public equity

This paper presents our Capital Market Assumptions (CMA) for public equity,
which outline the expected returns, volatility, and correlation estimates of different
equity markets in the next 10 years. In order to forecast returns, we consider two
widely used approaches including cyclically adjusted price-to-earnings ratio (CAPE)
and building blocks, and rely on backtesting to select the best model for each market. We also take into account effects of inflation and foreign exchange rate changes to reflect the real returns to investors and the increasing trend of cross-border investments.