Market Assumptions Methodology

The market assumptions used in the planning module, while based on past return data, are forward-looking. Historical data back to 1973 are used to create these assumptions, but the history used is different for each asset class. For those asset classes with shorter histories, extension methodologies are used to construct artificial back-histories back to 1973. For asset classes with longer histories, more data is used. The market assumptions are not simple historical averages. Ibbotson uses a proprietary version of the Building Blocks method to determine the market assumptions. Market assumptions are evaluated and changed once a year.

For more information, see the Ibbotson Asset Allocation Methodology (PDF).