What explains the marked difference between the volatility of ex post mortgage returns (as shown in Exhibits 199 and 1910) compared to expectations formed ex ante?
The significant difference between the volatility of ex post mortgage returns and ex ante expectations is due to several factors, including the unexpected changes in economic conditions, interest rates, and inflation. These factors can significantly affect the performance of mortgage investments, leading to returns that are different from what was anticipated at the time of investment.