Stocks, Bonds, And The Investment Horizon: Decision-making For The Long Run

Released on by Haim Levy
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  • Stocks, Bonds, And The Investment Horizon: Decision-making For The Long Run Book Detail

  • Author : Haim Levy
  • Release Date : 2022-04-28
  • Publisher : World Scientific
  • Genre : Business & Economics
  • Pages : 494
  • ISBN 13 : 9811250162
  • File Size : 74,74 MB
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Stocks, Bonds, And The Investment Horizon: Decision-making For The Long Run by Haim Levy PDF Summary

Book Description: A century ago, life expectancy was roughly 40 years, hence all income could be consumed, as for most people, there was no need to save for retirement. Today, things have drastically changed: Life expectancy exceeds 80 years in many countries, and one should expect to live and consume many years after retirement. Thus, we have many investors with various investment horizons, where the length of the investment horizon becomes a crucial factor in determining the best investment diversification.This book analyzes the effect of the investment horizon on the optimal diversification, specifically between stocks and bonds: Should a young investor and an older investor have the same portfolio? Is it recommended to savers for retirement to change the asset allocation between stocks and bonds as they grow older, as life cycle mutual funds do in practice? Is the idiom 'stocks for the long run' backed by scientific evidence? We analyze for which horizons it is recommended to employ the popular Mean-Variance rule and for which horizons employing this rule induces an economic distortion, hence a loss to the investors. It is shown that all relevant parameters for investment choice (means, variances, and correlations) change in a non-linear way with the horizon, a fact that makes the investment horizon crucial for investment choices. Similarly, the popular Sharpe, Treynor, and Jensen performance indices vary with the assumed horizon even in the case of independence over time. To analyze all the above issues, we employ the Mean-Variance rule and Stochastic Dominance rules, as well as direct expected utility calculations.

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Stocks, Bonds and the Investment Horizon

Stocks, Bonds and the Investment Horizon

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Financial advisors typically recommend that a long-term investor should hold a higher percentage of his wealth in stocks than a short-term investor. However, pa

Stocks for the Long Run

Stocks for the Long Run

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"One of the ten best investing books of all time."--The Washington Post One of investing's most celebrated icons updates his classic work to reflect today's wor